# Devon Energy Corp: Form 10-Q for the period ended Mar 31, 2023

- Company: [Devon Energy Corp](/companies/dvn.md) (CIK 1090012)
- Form: 10-Q
- Filed: 2023-05-09
- Accepted by EDGAR: May 9, 2023, 16:01 ET
- Period: 2023-03-31
- Accession: 0000950170-23-019312
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1090012/000095017023019312/dvn-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1090012/000095017023019312/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $3.76bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $221.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | $995.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | $1.53 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | $1.53 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 647,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $1.68bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $1.01bn | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2023-01-01 to 2023-03-31 | $596.0m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2023-01-01 to 2023-03-31 | $517.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-03-31 | $761.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $3.19bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $23.42bn | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $2.93bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-03-31 | $6.17bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-03-31 | $247.0m | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2023-03-31 | $247.0m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2023-03-31 | $10.98bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 38,441 characters.

The following discussion and analysis addresses material changes in our results of operations for the three-month period ended March 31, 2023 compared to previous periods, and in our financial condition and liquidity since December 31, 2022. For information regarding our critical accounting policies and estimates, see our 2022 Annual Report on Form 10-K under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

### Executive Overview

We are a leading independent oil and natural gas exploration and production company whose operations are focused onshore in the United Sates. Our operations are currently focused in five core areas: the Delaware Basin, Eagle Ford, Anadarko Basin, Williston Basin and Powder River Basin. Our asset base is underpinned by premium acreage in the economic core of the Delaware Basin and our diverse, top-tier resource plays provide a deep inventory of opportunities for years to come. In the third quarter of 2022, we acquired additional producing properties and leasehold interests in both the Williston Basin and Eagle Ford that were complementary to our existing acreage, offered operational synergies and added additional high-quality inventory to our portfolio.

We remain focused on building economic value by executing on our strategic priorities of moderating production growth, emphasizing capital and operational efficiencies, optimizing 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:

- First quarter oil production totaled 320 MBbls/d, which was an 11% increase from the first quarter of 2022.
- Expanded our authorized share repurchase program to $3.0 billion in May 2023, and through April 2023 have repurchased approximately 38.5 million of our common shares for $2.0 billion, or $51.91 per share, since inception of the plan.
- Exited the first quarter with $3.9 billion of liquidity, including $0.9 billion of cash.
- Generated $1.7 billion of operating cash flow in the first quarter of 2023 and $8.4 billion for the past twelve trailing months.
- Including variable dividends, paid dividends of approximately $596 million in the first quarter of 2023 and have declared approximately $461 million of dividends to be paid in the second quarter of 2023.

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 volatility in commodity prices, supply chain constraints and the economic uncertainty arising from inflation and recent geopolitical events.

### Results of Operations

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

### Q1 2023 vs. Q4 2022

Our first quarter 2023 and fourth quarter 2022 net earnings were $1.0 billion and $1.2 billion, respectively. The graph below shows the change in net earnings from the fourth quarter of 2022 to the first quarter of 2023. The material changes are further discussed by category on the following pages.

### Production Volumes

| Oil (MBbls/d) | Q1 2023 | % of Total | Q4 2022 | Change |
| --- | ---: | ---: | ---: | ---: |
| Delaware Basin | 211 | 66% | 201 | 5% |
| Eagle Ford | 40 | 13% | 42 | -4% |
| Anadarko Basin | 15 | 5% | 15 | 1% |
| Williston Basin | 36 | 11% | 37 | -4% |
| Powder River Basin | 14 | 4% | 16 | -9% |
| Other | 4 | 1% | 5 | -14% |
| Total | 320 | 100% | 316 | 2% |

| Gas (MMcf/d) | Q1 2023 | % of Total | Q4 2022 | Change |
| --- | ---: | ---: | ---: | ---: |
| Delaware Basin | 640 | 62% | 626 | 2% |
| Eagle Ford | 82 | 8% | 84 | -3% |
| Anadarko Basin | 237 | 23% | 238 | 0% |
| Williston Basin | 54 | 5% | 64 | -15% |
| Powder River Basin | 16 | 2% | 21 | -24% |
| Other | 1 | 0% | 1 | 32% |
| Total | 1,030 | 100% | 1,034 | 0% |

| NGLs (MBbls/d) | Q1 2023 | % of Total | Q4 2022 | Change |
| --- | ---: | ---: | ---: | ---: |
| Delaware Basin | 97 | 65% | 101 | -4% |
| Eagle Ford | 15 | 10% | 12 | 24% |
| Anadarko Basin | 26 | 18% | 23 | 15% |
| Williston Basin | 8 | 6% | 9 | -11% |
| Powder River Basin | 2 | 1% | 3 | -23% |
| Other | 1 | 0% | — | N/M |
| Total | 149 | 100% | 148 | 1% |

23

| Combined (MBoe/d) | Q1 2023 | % of Total | Q4 2022 | Change |
| --- | ---: | ---: | ---: | ---: |
| Delaware Basin | 415 | 65% | 407 | 2% |
| Eagle Ford | 68 | 11% | 68 | 1% |
| Anadarko Basin | 81 | 12% | 77 | 5% |
| Williston Basin | 53 | 8% | 57 | -7% |
| Powder River Basin | 19 | 3% | 22 | -13% |
| Other | 5 | 1% | 5 | -7% |
| Total | 641 | 100% | 636 | 1% |

From the fourth quarter of 2022 to the first quarter of 2023, the change in volumes contributed to a $31 million decrease to earnings as the higher production per day was offset by fewer days in the first quarter. The increase in volumes per day was primarily due to new well activity in the Delaware and Anadarko Basins which was partially offset by natural declines in the Williston and Powder River Basins.

### Realized Prices

| Oil (per Bbl) | Q1 2023 | Realization | Q4 2022 | Change |
| --- | ---: | ---: | ---: | ---: |
| WTI index | $76.17 |  | $82.53 | -8% |
| Realized price, unhedged | $74.32 | 98% | $82.31 | -10% |
| Cash settlements | $(0.10) |  | $(4.87) |  |
| Realized price, with hedges | $74.22 | 97% | $77.44 | -4% |

| Gas (per Mcf) | Q1 2023 | Realization | Q4 2022 | Change |
| --- | ---: | ---: | ---: | ---: |
| Henry Hub index | $3.44 |  | $6.26 | -45% |
| Realized price, unhedged | $2.29 | 67% | $4.39 | -48% |
| Cash settlements | $0.18 |  | $(0.38) |  |
| Realized price, with hedges | $2.47 | 72% | $4.01 | -38% |

| NGLs (per Bbl) | Q1 2023 | Realization | Q4 2022 | Change |
| --- | ---: | ---: | ---: | ---: |
| WTI index | $76.17 |  | $82.53 | -8% |
| Realized price, unhedged | $24.12 | 32% | $24.32 | -1% |
| Cash settlements | $— |  | $— |  |
| Realized price, with hedges | $24.12 | 32% | $24.32 | -1% |

| Combined (per Boe) | Q1 2023 | Q4 2022 | Change |
| --- | ---: | ---: | ---: |
| Realized price, unhedged | $46.44 | $53.66 | -13% |
| Cash settlements | $0.22 | $(3.04) |  |
| Realized price, with hedges | $46.66 | $50.62 | -8% |

From the fourth quarter of 2022 to the first quarter of 2023, realized prices contributed to a $429 million decrease in earnings. Unhedged realized oil, gas and NGL prices decreased primarily due to lower WTI, Henry Hub and Mont Belvieu index prices. The decrease in index prices was partially offset by improved hedge cash settlements related to gas commodities.

We currently have approximately 25% of both our remaining anticipated 2023 oil and gas production hedged.

### Hedge Settlements

|  | Q1 2023 Q | Q4 2022 | Change |
| --- | ---: | ---: | ---: |
| Oil | $(3) | $(141) | 98% |
| Natural gas | 16 | (36) | 144% |
| Total cash settlements (1) | $13 | $(177) | 107% |

(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

|  | Q1 2023 | Q4 2022 | Change |
| --- | ---: | ---: | ---: |
| LOE | $327 | $308 | 6% |
| Gathering, processing & transportation | 166 | 178 | -7% |
| Production taxes | 175 | 210 | -17% |
| Property taxes | 25 | 19 | 32% |
| Total | $693 | $715 | -3% |
| Per Boe: |  |  |  |
| LOE | $5.67 | $5.26 | 8% |
| Gathering, processing & transportation | $2.88 | $3.05 | -6% |
| Percent of oil, gas and NGL sales: |  |  |  |
| Production taxes | 6.5% | 6.7% | -2% |

Production expenses decreased from the fourth quarter of 2022 to the first quarter of 2023 primarily due to a decrease in production taxes which resulted from lower commodity prices. This decrease in production expenses was partially offset by an increase in LOE.

### 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.

| Field-level cash margin (Non-GAAP) | Q1 2023 | $ per BOE | Q4 2022 | $ per BOE |
| --- | ---: | ---: | ---: | ---: |
| Delaware Basin | $1,334 | $35.71 | $1,585 | $42.38 |
| Eagle Ford | 257 | $41.75 | 321 | $51.24 |
| Anadarko Basin | 154 | $21.09 | 203 | $28.53 |
| Williston Basin | 156 | $32.65 | 194 | $37.02 |
| Powder River Basin | 70 | $41.43 | 99 | $49.33 |
| Other | 15 | N/M | 22 | N/M |
| Total | $1,986 | $34.42 | $2,424 | $41.44 |

### DD&A

|  | Q1 2023 | Q4 2022 | Change |
| --- | ---: | ---: | ---: |
| Oil and gas per Boe | $10.25 | $10.14 | 1% |
| Oil and gas | $591 | $593 | 0% |
| Other property and equipment | 24 | 32 | -27% |
| Total | $615 | $625 | -2% |

### General and Administrative Expense

|  | Q1 2023 | Q4 2022 | Change |
| --- | ---: | ---: | ---: |
| G&A per Boe | $1.85 | $2.07 | -11% |
| Labor and benefits | $56 | $74 | -24% |
| Non-labor | 50 | 48 | 4% |
| Total | $106 | $122 | -13% |

G&A decreased in the first quarter of 2023 primarily due to a decrease in labor and benefit costs.

### Other Items

|  | Q1 2023 | Q4 2022 | Change in earnings |
| --- | ---: | ---: | ---: |
| Commodity hedge valuation changes (1) | $51 | $124 | $(73) |
| Marketing and midstream operations | (25) | (18) | (7) |
| Exploration expenses | 3 | 13 | 10 |
| Asset dispositions | — | (29) | (29) |
| Net financing costs | 72 | 73 | 1 |
| Other, net | 5 | (4) | (9) |
|  |  |  | $(107) |

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

We recognize fair value changes on our oil, gas and NGL derivative instruments in each reporting period. The changes in fair value resulted from new positions and settlements that occurred during each period, as well as the relationship between contract prices and the associated forward curves. For additional information, see Note 3 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Asset dispositions include $28 million in the fourth quarter of 2022 related to the re-valuation of contingent earnout payments associated with divested Barnett Shale assets. For additional information, see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

### Income Taxes

|  | Q1 2023 | Q4 2022 |
| --- | ---: | ---: |
| Current expense | $141 | $84 |
| Deferred expense | 80 | 265 |
| Total expense | $221 | $349 |
| Current tax rate | 12% | 5% |
| Deferred tax rate | 6% | 17% |
| Effective income tax rate | 18% | 22% |

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

### Q1 2023 vs. Q1 2022

Our first quarter 2023 and 2022 net earnings were both $1.0 billion. The graph below shows the change in net earnings from the first quarter of 2022 to the first quarter of 2023. The material changes are further discussed by category on the following pages.

### Production Volumes

| Oil (MBbls/d) | Q1 2023 | % of Total | Q1 2022 | Change |
| --- | ---: | ---: | ---: | ---: |
| Delaware Basin | 211 | 66% | 209 | 1% |
| Eagle Ford | 40 | 13% | 17 | 137% |
| Anadarko Basin | 15 | 5% | 14 | 6% |
| Williston Basin | 36 | 11% | 32 | 12% |
| Powder River Basin | 14 | 4% | 12 | 14% |
| Other | 4 | 1% | 4 | -2% |
| Total | 320 | 100% | 288 | 11% |

| Gas (MMcf/d) | Q1 2023 | % of Total | Q1 2022 | Change |
| --- | ---: | ---: | ---: | ---: |
| Delaware Basin | 640 | 62% | 561 | 14% |
| Eagle Ford | 82 | 8% | 61 | 33% |
| Anadarko Basin | 237 | 23% | 210 | 13% |
| Williston Basin | 54 | 5% | 54 | 0% |
| Powder River Basin | 16 | 2% | 19 | -14% |
| Other | 1 | 0% | 1 | 37% |
| Total | 1,030 | 100% | 906 | 14% |

| NGLs (MBbls/d) | Q1 2023 | % of Total | Q1 2022 | Change |
| --- | ---: | ---: | ---: | ---: |
| Delaware Basin | 97 | 65% | 92 | 6% |
| Eagle Ford | 15 | 10% | 9 | 69% |
| Anadarko Basin | 26 | 18% | 25 | 3% |
| Williston Basin | 8 | 6% | 8 | 6% |
| Powder River Basin | 2 | 1% | 2 | -4% |
| Other | 1 | 0% | — | N/M |
| Total | 149 | 100% | 136 | 10% |

| Combined (MBoe/d) | Q1 2023 | % of Total | Q1 2022 | Change |
| --- | ---: | ---: | ---: | ---: |
| Delaware Basin | 415 | 65% | 394 | 5% |
| Eagle Ford | 68 | 11% | 36 | 90% |
| Anadarko Basin | 81 | 12% | 75 | 8% |
| Williston Basin | 53 | 8% | 48 | 10% |
| Powder River Basin | 19 | 3% | 18 | 7% |
| Other | 5 | 1% | 4 | 6% |
| Total | 641 | 100% | 575 | 12% |

From the first quarter of 2022 to the first quarter of 2023, the change in volumes contributed to a $359 million increase in earnings. Volumes increased due to acquisitions in the Eagle Ford and Williston Basin that both closed in the third quarter of 2022. Volumes also increased due to continued development of the Delaware Basin and new well activity in the Anadarko Basin.

### Realized Prices

| Oil (per Bbl) | Q1 2023 | Realization | Q1 2022 | Change |
| --- | ---: | ---: | ---: | ---: |
| WTI index | $76.17 |  | $94.45 | -19% |
| Realized price, unhedged | $74.32 | 98% | $92.94 | -20% |
| Cash settlements | $(0.10) |  | $(11.32) |  |
| Realized price, with hedges | $74.22 | 97% | $81.62 | -9% |

| Gas (per Mcf) | Q1 2023 | Realization | Q1 2022 | Change |
| --- | ---: | ---: | ---: | ---: |
| Henry Hub index | $3.44 |  | $4.96 | -31% |
| Realized price, unhedged | $2.29 | 67% | $3.77 | -39% |
| Cash settlements | $0.18 |  | $(0.62) |  |
| Realized price, with hedges | $2.47 | 72% | $3.15 | -22% |

27

| NGLs (per Bbl) | Q1 2023 | Realization | Q1 2022 | Change |
| --- | ---: | ---: | ---: | ---: |
| WTI index | $76.17 |  | $94.45 | -19% |
| Realized price, unhedged | $24.12 | 32% | $37.76 | -36% |
| Cash settlements | $— |  | $— |  |
| Realized price, with hedges | $24.12 | 32% | $37.76 | -36% |

| Combined (per Boe) | Q1 2023 | Q1 2022 | Change |
| --- | ---: | ---: | ---: |
| Realized price, unhedged | $46.44 | $61.40 | -24% |
| Cash settlements | $0.22 | $(6.65) |  |
| Realized price, with hedges | $46.66 | $54.75 | -15% |

From the first quarter of 2022 to the first quarter of 2023, realized prices contributed to an $855 million decrease in earnings. Unhedged realized oil, gas and NGL prices decreased primarily due to lower WTI, Henry Hub and Mont Belvieu index prices. The decrease in index prices was partially offset by improved hedge cash settlements related to gas commodities.

### Hedge Settlements

|  | Q1 2023 | Q1 2022 | Change |
| --- | ---: | ---: | ---: |
| Oil | $(3) | $(293) | 99% |
| Natural gas | 16 | (51) | 131% |
| Total cash settlements (1) | $13 | $(344) | 104% |

(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

|  | Q1 2023 | Q1 2022 | Change |
| --- | ---: | ---: | ---: |
| LOE | $327 | $224 | 46% |
| Gathering, processing & transportation | 166 | 161 | 3% |
| Production taxes | 175 | 214 | -18% |
| Property taxes | 25 | 19 | 32% |
| Total | $693 | $618 | 12% |
| Per Boe: |  |  |  |
| LOE | $5.67 | $4.33 | 31% |
| Gathering, processing & transportation | $2.88 | $3.11 | -7% |
| Percent of oil, gas and NGL sales: |  |  |  |
| Production taxes | 6.5% | 6.7% | -3% |

LOE expenses and LOE per Boe increased primarily due to acquisitions in the Eagle Ford and Williston Basin and inflation. Production taxes decreased due to lower 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.

| Field-level cash margin (Non-GAAP) | Q1 2023 | $ per BOE | Q1 2022 | $ per BOE |
| --- | ---: | ---: | ---: | ---: |
| Delaware Basin | $1,334 | $35.71 | $1,877 | $52.99 |
| Eagle Ford | 257 | $41.75 | 158 | $48.92 |
| Anadarko Basin | 154 | $21.09 | 204 | $30.31 |
| Williston Basin | 156 | $32.65 | 207 | $47.65 |
| Powder River Basin | 70 | $41.43 | 86 | $54.32 |
| Other | 15 | N/M | 25 | N/M |
| Total | $1,986 | $34.42 | $2,557 | $49.45 |

### DD&A

|  | Q1 2023 | Q1 2022 | Change |
| --- | ---: | ---: | ---: |
| Oil and gas per Boe | $10.25 | $8.95 | 14% |
| Oil and gas | $591 | $463 | 28% |
| Other property and equipment | 24 | 26 | -9% |
| Total | $615 | $489 | 26% |

DD&A and our oil and gas per Boe rate both increased primarily due to acquisitions in the Eagle Ford and Williston Basin that closed in the third quarter of 2022.

### General and Administrative Expense

|  | Q1 2023 | Q1 2022 | Change |
| --- | ---: | ---: | ---: |
| G&A per Boe | $1.85 | $1.82 | 2% |
| Labor and benefits | $56 | $58 | -3% |
| Non-labor | 50 | 36 | 39% |
| Total | $106 | $94 | 13% |

G&A increased in the first quarter of 2023 primarily due to an increase in non-labor costs.

### Other Items

|  | Q1 2023 | Q1 2022 | Change in earnings |
| --- | ---: | ---: | ---: |
| Commodity hedge valuation changes (1) | $51 | $(339) | $390 |
| Marketing and midstream operations | (25) | (4) | (21) |
| Exploration expenses | 3 | 2 | (1) |
| Asset dispositions | — | (1) | (1) |
| Net financing costs | 72 | 85 | 13 |
| Other, net | 5 | (61) | (66) |
|  |  |  | $314 |

(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.

Net financing costs decreased in the first quarter of 2023 due to an increase in interest income resulting from higher interest rates. For additional information, see Note 13 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

|  | Q1 2023 | Q1 2022 |
| --- | ---: | ---: |
| Current expense | $141 | $103 |
| Deferred expense | 80 | 164 |
| Total expense | $221 | $267 |
| Current tax rate | 12% | 8% |
| Deferred tax rate | 6% | 13% |
| Effective income tax rate | 18% | 21% |

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

### 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 months ended March 31, 2023 and 2022.

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Operating cash flow | $1,677 | $1,837 |
| Capital expenditures | (1,012) | (537) |
| Divestitures of property and equipment | 21 | 26 |
| Investment activity, net | (29) | (14) |
| Repurchases of common stock | (517) | (211) |
| Common stock dividends | (596) | (667) |
| Noncontrolling interest activity, net | (11) | (8) |
| Other | (100) | (72) |
| Net change in cash, cash equivalents and restricted cash | $(567) | $354 |
| Cash, cash equivalents and restricted cash at end of period | $887 | $2,625 |

#### Operating Cash Flow

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 funded all of our capital expenditures and we continued to return value to our shareholders by utilizing cash flow for dividends and share repurchases.

#### 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 March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Delaware Basin | $584 | $395 |
| Eagle Ford | 192 | 26 |
| Anadarko Basin | 62 | 10 |
| Williston Basin | 99 | 23 |
| Powder River Basin | 38 | 33 |
| Other | 1 | 3 |
| Total oil and gas | 976 | 490 |
| Midstream | 16 | 29 |
| Other | 20 | 18 |
| Total capital expenditures | $1,012 | $537 |

30

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 capital expenditures for the first quarter of 2023 represent approximately 60% of our operating cash flow. Capital expenditures increased due to capital spend on assets acquired in 2022 and general inflation trends.

#### Divestitures of Property and Equipment

During the first three months of 2023 and 2022, we received contingent earnout payments related to assets previously sold. For additional information, please see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

#### Investment Activity

During the first three months of both 2023 and 2022, Devon received distributions from our investments of $8 million. Devon contributed $37 million and $22 million to our equity method investments during the first three months of 2023 and 2022, respectively.

#### Shareholder Distributions and Stock Activity

We repurchased approximately 10.1 million shares of common stock for $545 million and 4.0 million shares of common stock for $230 million under the share repurchase program authorized by our Board of Directors in the first quarter of 2023 and 2022, respectively. 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 first quarter of 2023 and 2022. Devon has raised its fixed dividend multiple times over the past year to $0.20 per share in the first quarter of 2023. In addition to the fixed quarterly dividend, we paid a variable dividend in the first quarter of 2023 and 2022.

| 2023: | Fixed | Variable | Total | Rate Per Share |
| --- | ---: | ---: | ---: | ---: |
| First quarter | $133 | $463 | $596 | $0.89 |
| 2022: |  |  |  |  |
| First quarter | $109 | $558 | $667 | $1.00 |

#### Noncontrolling Interest Activity, net

During the first three months of 2023 and 2022, we distributed $10 million and $8 million, respectively, to our noncontrolling interests in CDM.

### 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.

#### 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 first quarter of 2023, we held approximately $0.9 billion of cash. 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 March 31, 2023 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 2023. The currently elevated level of cost inflation could erode our cost efficiencies gained over previous years and pressure our margins for the remainder of 2023. Despite this, we expect to continue generating material amounts of free cash flow at current commodity price levels due to our strategy of spending within cash flow.

*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. We expect to mitigate the impact of cost inflation through efficiencies gained from the scale of our operations as well as by leveraging our long-standing relationships with our suppliers.

*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 March 31, 2023, we had approximately $3.0 billion of available borrowing capacity under our 2023 Senior Credit Facility. This credit facility supports our $3.0 billion of short-term credit under our commercial paper program. At March 31, 2023, 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 the size and scale of our production. 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 Baa2 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 fixed dividend. Our Board of Directors increased our quarterly fixed dividend rate by 11% to $0.20 per share beginning in February 2023. In addition to the fixed quarterly dividend, we may pay a variable dividend of 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.

In May 2023, Devon announced a cash dividend in the amount of $0.72 per share payable in the second quarter of 2023. The dividend consists of a $0.20 per share fixed quarterly dividend and a $0.52 per share variable quarterly dividend and will total approximately $461 million.

#### Share Repurchases

In May 2023, our Board of Directors increased our share repurchase program by $1.0 billion to a total authorized amount of $3.0 billion, and extended the expiration date to December 31, 2024. Through April 2023, we had executed $2.0 billion of the authorized program.

#### Capital Expenditures

Our capital expenditures budget for the remainder of 2023 is expected to range from approximately $2.6 billion to $2.8 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 the first quarter of 2023 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 year.

On August 16, 2022, the IRA was signed into law and included various income tax related provisions with an effective date beginning in 2023. Among the enacted provisions are a 15% CAMT and several new and expanded clean energy credits and incentives. Devon believes it is subject to the CAMT as Devon has an average annual adjusted financial statement income that exceeds $1 billion for the three-year period ended December 31, 2022. Devon continues to assess the potential impact of the CAMT, and material incremental cash tax could be incurred depending on actual operating results as well as future U.S. Treasury guidance.

For additional information regarding our critical accounting policies and estimates, see our 2022 Annual Report on Form 10-K.

### Non-GAAP Measures

We utilize “core earnings attributable to Devon” and “core earnings per share attributable to Devon” 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, deferred tax asset valuation allowance and fair value changes in derivative financial instruments.

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.

| 2023 | Three Months Ended March 31, Before Tax | After Tax | After NCI | Per Diluted Share |
| --- | ---: | ---: | ---: | ---: |
| Earnings attributable to Devon (GAAP) | $1,224 | $1,003 | $995 | $1.53 |
| Adjustments: |  |  |  |  |
| Deferred tax asset valuation allowance | — | (3) | (3) | (0.01) |
| Fair value changes in financial instruments | (53) | (40) | (40) | (0.06) |
| Core earnings attributable to Devon (Non-GAAP) | $1,171 | $960 | $952 | $1.46 |
| **2022** |  |  |  |  |
| Earnings attributable to Devon (GAAP) | $1,262 | $995 | $989 | $1.48 |
| Adjustments: |  |  |  |  |
| Asset dispositions | (1) | — | — | — |
| Deferred tax asset valuation allowance | — | 6 | 6 | 0.01 |
| Fair value changes in financial instruments | 338 | 260 | 260 | 0.39 |
| Core earnings attributable to Devon (Non-GAAP) | $1,599 | $1,261 | $1,255 | $1.88 |

### 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.

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

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| **Net earnings (GAAP)** | $1,003 | $995 |
| Financing costs, net | 72 | 85 |
| Income tax expense | 221 | 267 |
| Exploration expenses | 3 | 2 |
| Depreciation, depletion and amortization | 615 | 489 |
| Asset dispositions | — | (1) |
| Share-based compensation | 23 | 20 |
| Derivative and financial instrument non-cash valuation changes | (51) | 339 |
| Accretion on discounted liabilities and other | 5 | (61) |
| **EBITDAX (Non-GAAP)** | 1,891 | 2,135 |
| Marketing and midstream revenues and expenses, net | 25 | 4 |
| Commodity derivative cash settlements | (13) | 344 |
| General and administrative expenses, cash-based | 83 | 74 |
| **Field-level cash margin (Non-GAAP)** | $1,986 | $2,557 |

34

## Market risk

As filed, 903 characters.

### Commodity Price Risk

As of March 31, 2023, we have commodity derivatives that pertain to a portion of our estimated production for the last nine months of 2023, as well as for 2024 and 2025. 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 March 31, 2023, a 10% change in the forward curves associated with our commodity derivative instruments would have changed our net positions by approximately $115 million.

### Interest Rate Risk

As of March 31, 2023, we had total debt of $6.4 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 March 31, 2023.

## Controls and procedures

As filed, 1,156 characters.

### 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 March 31, 2023 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.

## Risk factors

As filed, 130 characters.

There have been no material changes to the information included in Item 1A. “Risk Factors” in our 2022 Annual Report on Form 10-K.

Filed May 9, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-019312. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.