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 ~~September 30, 2017~~March 31, 2020

☐	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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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 ~~October 18, 2017, 525.5~~April 22, 2020, 382.7 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 ~~Comprehensive~~ 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 – Divestitures	11
	Note 3 – Derivative Financial Instruments	11
	Note 4 – Share-Based Compensation	14
	Note 5 – Asset Impairments	15
	Note 6 – Restructuring and Transaction Costs	15
	Note 7 – Income Taxes	16
	Note 8 – Net Earnings (Loss) Per Share From Continuing Operations	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	19
	Note 15 – Asset Retirement Obligations	20
	Note 16 – Stockholders’ Equity	20
	Note 17 – Discontinued Operations and Assets Held For Sale	21
	Note 18 – Commitments and Contingencies	23
	Note 19 – Fair Value Measurements	24
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2925
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4342
Item 4.	Controls and Procedures	4342

Part II. Other Information
Item 1.	Legal Proceedings	4443
Item 1A.	Risk Factors	4443
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45

Signatures		46

Table of Contents

~~DEFINITIONS~~DEFINITIONS

Unless the context otherwise indicates, references to “us,” “we,” “our,” “ours,” ~~“Devon”~~“Devon,” the “Company” and ~~the “Company”~~“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~~this Quarterly Report on Form 10-Q:

“~~2015 Plan”~~ASC” means ~~the Devon Energy Corporation 2015 Long-Term Incentive Plan.~~Accounting Standards Codification.

“~~2017 Plan”~~ASR” means ~~the Devon Energy Corporation 2017 Long-Term Incentive Plan.~~an accelerated share-repurchase transaction with a financial institution to repurchase Devon’s common stock.

“ASU” means Accounting Standards Update.

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

“BKV” means Banpu Kalnin Ventures.

“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. ~~Bitumen and~~ 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.

~~“Canadian Plan” means Devon Canada Corporation Incentive Savings Plan.~~

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

“Devon Plan” means Devon Energy Corporation Incentive Savings Plan.

“E&P” means exploration and production activities.

“~~EnLink” means EnLink Midstream Partners, LP, a master limited partnership.~~

“FASB” means Financial Accounting Standards Board.

“G&A” means general and administrative expenses.

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

“~~General Partner” means EnLink Midstream, LLC, the indirect general partner of EnLink.~~

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

~~“LIBOR” means London Interbank Offered Rate.~~

“LOE” means lease operating expenses.

“MBbls” means thousand barrels.

“MBoe” means thousand Boe.

“Mcf” means thousand cubic feet.

“MMBoe” means million Boe.

~~Table of Contents~~

“MMBtu” means million Btu.

“MMcf” means million cubic feet.

Table of Contents

“N/M” means not meaningful.

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

“NYMEX” means New York Mercantile Exchange.

“OPEC” means Organization of the Petroleum Exporting Countries.

“OPIS” means Oil Price Information Service.

“SEC” means United States Securities and Exchange Commission.

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

“TSR” means total shareholder return.

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

“VIE” means variable interest entity.

“WTI” means West Texas Intermediate.

“/Bbl” means per barrel.

“/d” means per day.

~~“/Bbl” means per barrel.~~

“/MMBtu” means per MMBtu.

Table of Contents

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. ~~Such forward-looking~~All statements, ~~are based on our examination~~other than statements of historical ~~operating trends,~~facts, included in this report that address activities, events or developments that Devon expects, believes or anticipates will or may occur in the ~~information used to prepare our December 31, 2016 reserve reports and other data in our possession or available from third parties.~~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 from our expectations due to a number of factors, including, but not limited ~~to:~~to those, identified below.

The COVID-19 pandemic and its related repercussions have created significant volatility, uncertainty and turmoil in the ~~volatility of~~global economy and our industry. This turmoil has included an unprecedented supply-and-demand imbalance for oil ~~gas and NGL prices;~~

~~uncertainties inherent in estimating oil, gas and NGL reserves;~~

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

~~the uncertainties, costs and risks involved in exploration and development activities;~~

~~risks related to our hedging activities;~~

~~counterparty credit risks;~~

~~regulatory restrictions, compliance costs~~ and other ~~risks relating~~commodities, resulting in a swift and material decline in commodity prices in early 2020. Our future actual results could differ materially from the forward-looking statements in this report due to ~~governmental regulation,~~the COVID-19 pandemic and related impacts, including, ~~with respect~~among other things: contributing to ~~environmental matters;~~

~~risks relating to our indebtedness;~~

a sustained or further deterioration in commodity prices; causing takeaway capacity constraints for production, resulting in production shut-ins and additional downward pressure on impacted regional pricing differentials; limiting our ability to ~~successfully complete mergers, acquisitions and divestitures;~~

access sources of capital due to disruptions in financial markets; increasing the ~~extent to which insurance covers any losses we may experience;~~

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

~~midstream capacity constraints and potential interruptions in production;~~

~~competition for leases, materials, people and capital;~~

~~cyberattacks targeting our systems and infrastructure; and~~

~~any of the other~~a downgrade from credit rating agencies; exacerbating counterparty credit risks and ~~uncertainties discussed in this report, our 2016 Annual Report on Form 10-K~~the risk of supply chain interruptions; and ~~our~~increasing the risk of operational disruptions due to social distancing measures and other ~~filings~~changes to business practices.

In addition to the risks associated with the ~~SEC.~~COVID-19 pandemic and its related impacts, our actual future results could differ materially from our expectations due to other factors, including, among other things:

•

the volatility of oil, gas and NGL prices;

•

uncertainties inherent in estimating oil, gas and NGL reserves;

•

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

•

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

•

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;

•

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; and

•

any of the other risks and uncertainties discussed in this report, our 2019 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.

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED ~~COMPREHENSIVE~~ STATEMENTS OF COMPREHENSIVE EARNINGS

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(Unaudited)

(Millions, except per share amounts)

Oil, gas and NGL sales

$
1,245

$
1,113

$
3,760

$
3,023

Oil, gas and NGL derivatives

(144
)

79

214

(30
)
Marketing and midstream revenues

2,055

1,690

5,992

4,503

Asset dispositions and other

—

1,351

10

1,351

Total revenues and other

3,156

4,233

9,976

8,847

Lease operating expenses

391

355

1,176

1,215

Marketing and midstream operating expenses

1,813

1,480

5,319

3,884

General and administrative expenses

153

141

498

482

Production and property taxes

71

67

227

220

Depreciation, depletion and amortization

400

394

1,162

1,420

Asset impairments

2

319

9

4,851

Restructuring and transaction costs

—

(5
)

—

266

Other operating items

—

17

11

41

Total operating expenses

2,830

2,768

8,402

12,379

Operating income (loss)

326

1,465

1,574

(3,532
)
Net financing costs

127

243

370

570

Other nonoperating items

(73
)

44

(124
)

150

Earnings (loss) before income taxes

272

1,178

1,328

(4,252
)
Income tax expense (benefit)

25

171

51

(228
)
Net earnings (loss)

247

1,007

1,277

(4,024
)
Net earnings (loss) attributable to noncontrolling interests

19

14

59

(391
)
Net earnings (loss) attributable to Devon

$
228

$
993

$
1,218

$
(3,633
)
Net earnings (loss) per share attributable to Devon:

Basic

$
0.43

$
1.90

$
2.32

$
(7.22
)
Diluted

$
0.43

$
1.89

$
2.31

$
(7.22
)
Comprehensive earnings (loss):

Net earnings (loss)

$
247

$
1,007

$
1,277

$
(4,024
)
Other comprehensive earnings, net of tax:

Foreign currency translation

1

2

1

28

Pension and postretirement plans

5

11

14

20

Other

—

—

(2
)

—

Other comprehensive earnings, net of tax

6

13

13

48

Comprehensive earnings (loss)

253

1,020

1,290

(3,976
)
Comprehensive earnings (loss) attributable to
noncontrolling interests

19

14

59

(391
)
Comprehensive earnings (loss) attributable to Devon

$
234

$
1,006

$
1,231

$
(3,585
)

	Three Months Ended March 31,
	2020			2019
	(Unaudited)
Upstream revenues	$	1,527		$	314
Marketing and midstream revenues		560			765
Total revenues		2,087			1,079
Production expenses		318			283
Exploration expenses		112			4
Marketing and midstream expenses		578			750
Depreciation, depletion and amortization		401			360
Asset impairments		2,666			—
Asset dispositions		—			(45	)
General and administrative expenses		102			135
Financing costs, net		65			60
Restructuring and transaction costs		—			51
Other expenses		(48	)		(22	)
Total expenses		4,194			1,576
Loss from continuing operations before income taxes		(2,107	)		(497	)
Income tax benefit		(417	)		(119	)
Net loss from continuing operations		(1,690	)		(378	)
Net earnings (loss) from discontinued operations, net of income taxes		(125	)		61
Net loss		(1,815	)		(317	)
Net earnings attributable to noncontrolling interests		1			—
Net loss attributable to Devon	$	(1,816	)	$	(317	)
Basic net earnings (loss) per share:
Basic loss from continuing operations per share	$	(4.48	)	$	(0.89	)
Basic earnings (loss) from discontinued operations per share		(0.34	)		0.15
Basic net loss per share	$	(4.82	)	$	(0.74	)
Diluted net earnings (loss) per share:
Diluted loss from continuing operations per share	$	(4.48	)	$	(0.89	)
Diluted earnings (loss) from discontinued operations per share		(0.34	)		0.15
Diluted net loss per share	$	(4.82	)	$	(0.74	)
Comprehensive earnings (loss):
Net loss	$	(1,815	)	$	(317	)
Other comprehensive earnings, net of tax:
Foreign currency translation, discontinued operations		—			35
Pension and postretirement plans		1			2
Other comprehensive earnings, net of tax		1			37
Comprehensive loss:		(1,814	)		(280	)
Comprehensive earnings attributable to noncontrolling interests		1			—
Comprehensive loss attributable to Devon	$	(1,815	)	$	(280	)

See accompanying notes to consolidated financial statements

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(Unaudited)

(Millions)

Cash flows from operating activities:

Net earnings (loss)

$
247

$
1,007

$
1,277

$
(4,024
)
Adjustments to reconcile net earnings (loss) to net
cash from operating activities:

Depreciation, depletion and amortization

400

394

1,162

1,420

Asset impairments

2

319

9

4,851

Gains and losses on asset sales

1

(1,351
)

(6
)

(1,351
)
Deferred income tax expense (benefit)

(14
)

86

(20
)

(300
)
Commodity derivatives

144

(79
)

(214
)

30

Cash settlements on commodity derivatives

24

12

43

15

Other derivatives and financial instruments

9

21

16

329

Cash settlements on other derivatives and
financial instruments

—

3

—

(148
)
Asset retirement obligation accretion

16

19

47

58

Share-based compensation

33

23

122

163

Other

(85
)

127

(134
)

(31
)
Net change in working capital

7

137

94

208

Change in long-term other assets

2

(3
)

12

10

Change in long-term other liabilities

(10
)

12

12

7

Net cash from operating activities

776

727

2,420

1,237

Cash flows from investing activities:

Capital expenditures

(735
)

(421
)

(2,203
)

(1,659
)
Acquisitions of property, equipment and businesses

(6
)

(3
)

(39
)

(1,641
)
Proceeds from sale of investment

—

—

190

—

Divestitures of property and equipment

209

1,680

323

1,889

Other

(1
)

34

(5
)

7

Net cash from investing activities

(533
)

1,290

(1,734
)

(1,404
)
Cash flows from financing activities:

Borrowings of long-term debt, net of issuance costs

413

816

2,208

1,662

Repayments of long-term debt

(571
)

(2,173
)

(1,950
)

(2,722
)
Payment of installment payable

—

—

(250
)

—

Net short-term debt repayments

—

—

—

(626
)
Early retirement of debt

—

(82
)

(6
)

(82
)
Issuance of common stock

—

—

—

1,469

Issuance of subsidiary units

414

59

486

835

Dividends paid on common stock

(30
)

(32
)

(95
)

(190
)
Contributions from noncontrolling interests

18

146

47

152

Distributions to noncontrolling interests

(84
)

(77
)

(247
)

(224
)
Shares exchanged for tax withholdings

(3
)

(2
)

(67
)

(30
)
Other

—

(1
)

(2
)

(7
)
Net cash from financing activities

157

(1,346
)

124

237

Effect of exchange rate changes on cash

12

(9
)

12

5

Net change in cash and cash equivalents

412

662

822

75

Cash and cash equivalents at beginning of period

2,369

1,723

1,959

2,310

Cash and cash equivalents at end of period

$
2,781

$
2,385

$
2,781

$
2,385

	Three Months Ended March 31,
	2020			2019
	(Unaudited)
Cash flows from operating activities:
Net loss	$	(1,815	)	$	(317	)
Adjustments to reconcile net loss to net cash from operating activities:
Net (earnings) loss from discontinued operations, net of income taxes		125			(61	)
Depreciation, depletion and amortization		401			360
Asset impairments		2,666			—
Leasehold impairments		110			1
Accretion on discounted liabilities		8			9
Total (gains) losses on commodity derivatives		(720	)		605
Cash settlements on commodity derivatives		101			31
Gains on asset dispositions		—			(45	)
Deferred income tax benefit		(311	)		(115	)
Share-based compensation		20			44
Other		—			(14	)
Changes in assets and liabilities, net		(56	)		(61	)
Net cash from operating activities - continuing operations		529			437
Cash flows from investing activities:
Capital expenditures		(425	)		(490	)
Acquisitions of property and equipment		(4	)		(10	)
Divestitures of property and equipment		25			310
Net cash from investing activities - continuing operations		(404	)		(190	)
Cash flows from financing activities:
Repayments of long-term debt		—			(162	)
Repurchases of common stock		(38	)		(999	)
Dividends paid on common stock		(34	)		(34	)
Contributions from noncontrolling interests		5			—
Distributions to noncontrolling interests		(3	)		—
Shares exchanged for tax withholdings		(17	)		(19	)
Net cash from financing activities - continuing operations		(87	)		(1,214	)
Net change in cash, cash equivalents and restricted cash of continuing operations		38			(967	)
Cash flows from discontinued operations:
Operating activities		(131	)		(59	)
Investing activities		(1	)		(59	)
Financing activities		—			(7	)
Effect of exchange rate changes on cash		(23	)		1
Net change in cash, cash equivalents and restricted cash of discontinued operations		(155	)		(124	)
Net change in cash, cash equivalents and restricted cash		(117	)		(1,091	)
Cash, cash equivalents and restricted cash at beginning of period		1,844			2,446
Cash, cash equivalents and restricted cash at end of period	$	1,727		$	1,355

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	1,527		$	1,327
Cash restricted for discontinued operations		200			—
Restricted cash included in other current assets		—			28
Total cash, cash equivalents and restricted cash	$	1,727		$	1,355

See accompanying notes to consolidated financial statements

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30, 2017			December 31, 2016
	(Unaudited)						March 31, 2020			December 31, 2019
	(Millions, except share data)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,781		$	1,959		$	1,527		$	1,464
Cash restricted for discontinued operations								200			380
Accounts receivable		1,462			1,356			594			832
Assets held for sale		—			193
Current assets associated with discontinued operations								736			896
Other current assets		379			264			998			279
Total current assets		4,622			3,772			4,055			3,851
Property and equipment, at cost:
Oil and gas, based on full cost accounting:
Subject to amortization		78,470			75,648
Not subject to amortization		2,853			3,437
Total oil and gas		81,323			79,085
Midstream and other		11,097			10,455
Total property and equipment, at cost		92,420			89,540
Less accumulated depreciation, depletion and amortization		(75,338	)		(73,350	)
Property and equipment, net		17,082			16,190
Oil and gas property and equipment, based on successful efforts accounting, net								4,756			7,558
Other property and equipment, net ($89 and $80 million related to CDM in 2020 and 2019, respectively)								1,024			1,035
Total property and equipment, net								5,780			8,593
Goodwill		3,964			3,964			753			753
Right-of-use assets								237			243
Other long-term assets		1,891			1,987			245			196
Long-term assets associated with discontinued operations								74			81
Total assets	$	27,559		$	25,913		$	11,144		$	13,717
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	797		$	642		$	444		$	428
Revenues and royalties payable		1,012			908			617			730
Short-term debt		20			—
Current liabilities associated with discontinued operations								294			459
Other current liabilities		1,003			1,066			199			310
Total current liabilities		2,832			2,616			1,554			1,927
Long-term debt		10,383			10,154			4,295			4,294
Lease liabilities								245			244
Asset retirement obligations		1,100			1,226			386			380
Other long-term liabilities		645			894			461			426
Long-term liabilities associated with discontinued operations								163			185
Deferred income taxes		665			648			—			341
Equity:
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 525 million and 523 million shares in 2017 and 2016, respectively		53			52
Stockholders' equity:
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 383 million and 382 million shares in 2020 and 2019, respectively								38			38
Additional paid-in capital		7,207			7,237			2,701			2,735
Accumulated deficit		(428	)		(1,646	)
Accumulated other comprehensive earnings		297			284
Retained earnings								1,298			3,148
Accumulated other comprehensive loss								(118	)		(119	)
Total stockholders’ equity attributable to Devon		7,129			5,927			3,919			5,802
Noncontrolling interests		4,805			4,448			121			118
Total equity		11,934			10,375			4,040			5,920
Total liabilities and equity	$	27,559		$	25,913		$	11,144		$	13,717

See accompanying notes to consolidated financial statements

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

											Accumulated																				Retained			Other
					Additional			Retained			Other																	Additional			Earnings			Comprehensive
	Common Stock				Paid-In			Earnings			Comprehensive		Treasury			Noncontrolling			Total			Common Stock						Paid-In			(Accumulated			Earnings			Treasury			Noncontrolling			Total
	Shares		Amount		Capital			(Accumulated Deficit)			Earnings		Stock			Interests			Equity			Shares			Amount			Capital			Deficit)			(Loss)			Stock			Interests			Equity
	(Unaudited)																					(Unaudited)
	(Millions)
Nine Months Ended September 30, 2017
Balance as of December 31, 2016		523	$	52	$	7,237		$	(1,646	)	$	284	$	—		$	4,448		$	10,375
Net earnings		—		—		—			1,218			—		—			59			1,277
Three Months Ended March 31, 2020
Balance as of December 31, 2019																							382		$	38		$	2,735		$	3,148		$	(119	)	$	—		$	118		$	5,920
Net earnings (loss)																							—			—			—			(1,816	)		—			—			1			(1,815	)
Other comprehensive earnings, net of tax		—		—		—			—			13		—			—			13			—			—			—			—			1			—			—			1
Restricted stock grants, net of cancellations		1		1		—			—			—		—			—			1			3			—			—			—			—			—			—			—
Common stock repurchased		—		—		—			—			—		(43	)		—			(43	)		—			—			—			—			—			(54	)		—			(54	)
Common stock retired		—		—		(43	)		—			—		43			—			—			(3	)		—			(54	)		—			—			54			—			—
Common stock dividends		—		—		(95	)		—			—		—			—			(95	)		—			—			—			(34	)		—			—			—			(34	)
Share-based compensation		1		—		96			—			—		—			—			96			1			—			20			—			—			—			—			20
Subsidiary equity transactions		—		—		12			—			—		—			545			557
Contributions from noncontrolling interests																							—			—			—			—			—			—			5			5
Distributions to noncontrolling interests		—		—		—			—			—		—			(247	)		(247	)		—			—			—			—			—			—			(3	)		(3	)
Balance as of September 30, 2017		525	$	53	$	7,207		$	(428	)	$	297	$	—		$	4,805		$	11,934
Nine Months Ended September 30, 2016
Balance as of December 31, 2015		418	$	42	$	4,996		$	1,781		$	230	$	—		$	3,940		$	10,989
Balance as of March 31, 2020																							383		$	38		$	2,701		$	1,298		$	(118	)	$	—		$	121		$	4,040
Three Months Ended March 31, 2019
Balance as of December 31, 2018																							450		$	45		$	4,486		$	3,650		$	1,027		$	(22	)	$	—		$	9,186
Effect of adoption of lease accounting																							—			—			—			(19	)		—			—			—			(19	)
Net loss		—		—		—			(3,633	)		—		—			(391	)		(4,024	)		—			—			—			(317	)		—			—			—			(317	)
Other comprehensive earnings, net of tax		—		—		—			—			48		—			—			48			—			—			—			—			37			—			—			37
Restricted stock grants, net of cancellations		3		—		—			—			—		—			—			—			3			—			—			—			—			—			—			—
Common stock repurchased		—		—		—			—			—		(23	)		—			(23	)		—			—			—			—			—			(1,042	)		—			(1,042	)
Common stock retired		—		—		(23	)		—			—		23			—			—			(36	)		(3	)		(1,014	)		—			—			1,017			—			—
Common stock dividends		—		—		(65	)		(125	)		—		—			—			(190	)		—			—			—			(34	)		—			—			—			(34	)
Common stock issued		103		10		2,117			—			—		—			—			2,127
Share-based compensation		—		—		142			—			—		—			—			142			—			—			46			—			—			—			—			46
Subsidiary equity transactions		—		—		320			—			—		—			896			1,216
Distributions to noncontrolling interests		—		—		—			—			—		—			(224	)		(224	)
Balance as of September 30, 2016		524	$	52	$	7,487		$	(1,977	)	$	278	$	—		$	4,221		$	10,061
Balance as of March 31, 2019																							417		$	42		$	3,518		$	3,280		$	1,064		$	(47	)	$	—		$	7,857

See accompanying notes to consolidated financial statements

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	1.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 ~~2016~~2019 Annual Report on Form ~~10-K.~~10-K.

The accompanying unaudited interim financial statements ~~furnished~~ in this report reflect all adjustments that are, in the opinion of management, necessary for a fair statement of Devon’s results of operations and cash flows for the three-month ~~and nine-month~~ periods ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 and Devon’s financial position as of ~~September 30, 2017.~~

~~Recently Adopted Accounting Standards~~

~~In January 2017, Devon adopted ASU 2016-09,~~ ~~Compensation – Stock Compensation (Topic 718)~~March 31, 2020. As further discussed in Note 17, ~~Improvements~~Devon reached an agreement to ~~Employee Share-Based Payment Accounting~~sell its Barnett Shale assets in December 2019, which was amended in April 2020, and sold its Canadian operations on June 27, 2019. ~~Its objective is~~Activity relating to ~~simplify several aspects~~Devon’s Barnett Shale assets, inclusive of properties divested as partial sales of the ~~accounting for share-based payments, including income taxes when awards vest or~~Barnett Shale common operating field in previous reporting periods located primarily in Johnson and Wise counties, Texas, and its Canadian operations are ~~settled, statutory withholding and forfeitures.~~ ~~As the result of adoption, Devon made certain income tax presentation changes, most notably prospectively presenting excess tax benefits and deficiencies in the~~classified as discontinued operations within Devon’s consolidated ~~comprehensive~~ statements of comprehensive earnings and ~~as operating cash flows in the~~ consolidated statements of cash flows. ~~Devon also retrospectively applied the new cash flow statement guidance dictating the presentation~~The associated assets and liabilities of ~~shares exchanged for tax-withholding purposes~~Devon’s Barnett Shale assets and Canadian operations are presented as a financing activity. The adoption of the new guidance did not materially impact the consolidated financial statements for the nine months ended September 30, 2017 or previously reported financial information but could have a more material future impact.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles – Goodwill And Other (Topic 350)~~, ~~Simplifying the Test for Goodwill Impairment~~ ~~("ASU 2017-04"). ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill~~assets and liabilities associated with its carrying amount as part of step two of the goodwill impairment test. Under ASU 2017-04, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, including any interim impairment tests within those annual periods, with early application for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. In January 2017, Devon elected to early adopt ASU 2017-04, and the adoption had no impactdiscontinued operations on the consolidated ~~financial statements.~~balance sheets.

During the fourth quarter of 2019, Devon ~~will perform future goodwill impairment tests according~~entered into an agreement to ~~ASU 2017-04.~~form Cotton Draw Midstream, L.L.C. (“CDM”), a joint-venture entity in the Delaware Basin with an affiliate of QL Capital Partners, LP (“QLCP”). 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, on Devon's consolidated balance sheets if material.

~~Issued Accounting Standards Not Yet Adopted~~

Disaggregation of Revenue

The ~~FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606). This ASU will supersede the revenue recognition requirements in Topic 605,~~ ~~Revenue Recognition~~ ~~and industry-specific guidance in Subtopic 932-605,~~ ~~Extractive Activities – Oil and Gas – Revenue Recognition. This ASU provides guidance concerning the recognition and measurement of~~following table presents revenue from contracts with ~~customers. Its objective is to~~ ~~increase~~customers that are disaggregated based on the ~~usefulness~~type of ~~information in the financial statements regarding the nature, timing and uncertainty of revenues. The effective date for ASU 2014-09 was delayed through the issuance of ASU 2015-14,~~ ~~Revenue from Contracts with Customers – Deferral of the Effective Date, to annual and interim periods beginning in 2018, with early adoption permitted in 2017. Devon has not early adopted this ASU. The ASU is required~~ ~~to be adopted using either the retrospective transition method, which requires restating previously reported results~~good or the cumulative effect (modified retrospective) transition method, which utilizes a cumulative-effect adjustment to retained earnings in the period of adoption to account for prior period effects rather than restating previously reported results. Devon intends to use the cumulative effect transition method and does not anticipate this ASU will have a material impact on its balance sheet or related consolidated statements of earnings, equity or cash flows. However, Devon continues to evaluate the “gross versus net” presentation of certain revenues and associated expenses in its consolidated statements of earnings. Any presentation changes would have no impact on operating income, earnings or cash flows. Devon does not expect significant changes to its annual disclosures; however, Devon’s quarterly disclosures will expand upon adoption of this ASU. Devon has implemented a process to gather and provide the quarterly disclosures required by the ASU.service.

	Three Months Ended March 31,
	2020		2019
Oil	$	662	$	659
Gas		70		138
NGL		75		122
Oil, gas and NGL revenues from contracts with customers		807		919
Oil, gas and NGL derivatives		720		(605	)
Upstream revenues		1,527		314

Oil		329		356
Gas		92		218
NGL		137		191
Total marketing revenues		558		765
Midstream revenues		2		—
Total marketing and midstream revenues from contracts with customers		560		765
Total revenues	$	2,087	$	1,079

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~The~~Recently Adopted Accounting Standards

In 2016, the FASB issued ASU ~~2016-02,~~ ~~Leases (Topic 842)~~.2016-13, Financial Instruments-Credit Losses. This ASU ~~will supersede~~changes the ~~lease requirements~~impairment model for trade receivables, held-to-maturity debt securities, net investments in ~~Topic 840,~~ ~~Leases~~leases, loans and other financial assets measured at amortized cost from the current “incurred loss” model to a new forward-looking “expected loss” model. Devon adopted this ASU in the first quarter of 2020 using the modified retrospective approach. Devon assesses credit risk by class of account type which includes cash equivalents and oil and gas, marketing and midstream, joint interest and other accounts receivable. These classes are then further evaluated using a probability weighted scenario assessment based on historical losses and a probability of future default. This evaluation is supported by an assessment of risk factors such as the age of receivable, current macro-economic conditions, credit rating of the counterparty and our historical loss rate. This adoption did not have a material impact on Devon’s consolidated financial statements.

2.Divestitures

Discontinued Operations – Upstream Assets

In June 2019, Devon completed the sale of substantially all of its oil and gas assets and operations in Canada to Canadian Natural Resources Limited for proceeds, net of purchase price adjustments, of $2.6 billion ($3.4 billion Canadian dollars), and recognized a pre-tax gain of $223 million ($425 million, net of tax, primarily due to a significant deferred tax benefit). ~~Its objective is~~Additional information can be found in Note 17.

Devon announced the sale of its Barnett Shale assets to increase transparency and comparability among organizations. This ASU provides guidance requiring lessees to recognize most leases on their balance sheet. Lessor accounting does not significantly change, except for some changes made to align with new revenue recognition requirements. This ASU is effective for Devon beginning January 1,BKV in December 2019 and ~~will be applied using~~subsequently amended the agreement in April 2020. Under the amended terms, Devon has agreed to sell its Barnett Shale assets for $570 million in cash, before purchase price adjustments, at closing, which was extended to December 31, 2020. Devon recognized a ~~modified retrospective transition method, which requires applying the new guidance~~$748 million asset impairment related to leases that exist or are entered into after the beginning of the earliest period in the financial statements. Early adoption is permitted, but Devon does not plan to early adopt. Devon is in the process of evaluating contracts and gathering the necessary terms and data elements for purposes of determining the impact this ASU will have on its consolidated financial statements and related disclosures. Recently, the FASB ~~issued~~ ~~Proposed Accounting Standards Update (ASU) No. 2017-290,~~ ~~Leases (Topic 842), Land Easement Practical Expedient for Transition to Topic 842. This proposed ASU~~ ~~would permit an entity not to apply Topic 842 to land easements and rights-of-way that exist or expired before the effective date of Topic 842 and that were not previously assessed under Topic 840.~~An entity would continue to apply its current accounting policy for accounting for land easements that existed before the effective date of Topic 842. Once an entity adopts Topic 842, it would apply that Topic prospectively to all new (or modified) land easements and rights-of-way to determine whether the arrangement should be accounted for as a lease. ~~For Devon,~~ these ~~contracts represent a relatively small percentage of the aggregate value of contracts being evaluated but represent a significant number of contracts.~~

Based on continuing research, Devon estimates a large number of contracts and data elements must be gathered and reviewed to ensure proper accounting of these contracts once this ASU is effective. Devon anticipates the adoption of this standard will significantly impact its consolidated financial statements, systems, processes and controls and is evaluating technology requirements and solutions needed to comply with the requirements of this ASU.

~~The FASB issued ASU No. 2017-07,~~ ~~Compensation – Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.~~ ~~This ASU will~~ require entities to present the service cost component of net periodic benefit cost in the same line item as other employee compensation costs and present the other components of net periodic benefit cost outside of operating income in the statement of earnings. Only the service cost component of net periodic benefit cost is eligible for capitalization. This ASU is effective for Devon beginning January 1, 2018, and presentation changes in the statement of earnings will be applied retrospectively, while service cost component capitalization will be applied prospectively. Upon adoption of this ASU, Devon will reclassify $7 million, $14 million and $16 million of non-service cost components of net periodic benefit costs for 2017, 2016 and 2015, respectively, as other nonoperating items. Such amounts are currently classified in Devon’s G&A. No other changes upon adopting this ASU are expected to be material.

2.	~~Acquisitions and Divestitures~~

~~Devon Acquisitions~~

~~In January 2016, Devon acquired approximately 80,000 net acres (unaudited) and~~ assets in the ~~STACK play for approximately $1.5 billion. Devon funded~~fourth quarter of 2019 and an incremental $179 million asset impairment during the ~~acquisition with $849 million~~first quarter of cash, after adjustments, and $659 million of common equity shares. The purchase price allocation was approximately $1.3 billion to unproved properties and approximately $200 million to proved properties.2020. Additional information can be found in Note 17.

~~2017~~Continuing Operations – Upstream Assets

During the first quarter of 2020, Devon ~~Asset Divestitures~~entered into a farmout agreement in which the third-party to the agreement can participate in the development of certain Devon-owned non-operated interests in the Delaware Basin. Under the agreement, Devon will periodically transfer working interests to the third party, who will then fund its share of operating and development costs. Once certain investment hurdles are met, a portion of the working interest held by the third party will revert back to Devon. No material activity occurred during the first quarter of 2020.

In ~~May 2017,~~the first quarter of 2019, Devon ~~announced~~received proceeds of approximately $300 million and recognized a ~~program to divest approximately $1 billion~~$45 million net gain on asset dispositions, primarily from sales of ~~upstream assets. The~~ non-core assets ~~identified for monetization include select portions of~~in the Barnett Shale focused primarily in and around Johnson County and other properties located principally within Devon’s U.S. resource base. Through September 30, 2017, Devon completed divestiture transactions totaling approximately $400 million, before purchase price adjustments. EstimatedPermian Basin. In aggregate, the total estimated proved reserves associated with these ~~assets were less than 1% of total U.S. proved reserves.~~

~~2016 Devon Asset Divestitures~~

~~In the second quarter of 2016, Devon~~ divested ~~non-core assets for approximately $200 million. Estimated proved reserves associated with these assets were less than 1% of total U.S. proved reserves.~~

In the third quarter of 2016, in several separate transactions with different purchasers, Devon divested non-core upstream assets located in east Texas, the Anadarko Basin and the Midland Basin for approximately $1.7 billion. Estimated proved reserves associated with these assets were approximately ~~146 MMBoe, or approximately 9% of total U.S. proved reserves.~~25 MMBoe.

~~Table of Contents~~

~~DEVON ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

~~Proceeds from the transactions were used primarily for debt repayment and to support capital investment in Devon’s core resource plays.~~

The divestiture transactions that closed in the third quarter of 2016 significantly altered the costs and reserves relationship of Devon’s U.S. cost center. Therefore, Devon recognized a $1.4 billion gain in the third quarter of 2016 associated with these divestitures. A summary of the gain computation follows.

Three Months Ended September 30, 2016

(Millions)

Proceeds received, net of purchase price adjustments and selling costs

$
1,653

Asset retirement obligation assumed by purchasers

250

Total consideration received

1,903

Allocated oil and gas property basis sold

355

Allocated goodwill

197

Total assets sold

552

Gain on asset sales

$
1,351

~~EnLink Acquisitions~~

In January 2016, EnLink acquired Anadarko Basin gathering and processing midstream assets, along with dedicated acreage service rights and service contracts, for approximately $1.4 billion. The purchase price allocation was $1.0 billion to intangible assets and approximately $400 million to property and equipment. EnLink funded the acquisition with approximately $215 million of General Partner common units and approximately $800 million of cash, primarily funded with the issuance of EnLink preferred units. The remaining $500 million of the purchase price was to be paid within one year with the option to defer $250 million of the final payment 24 months from the close date. The first installment payment of $250 million was paid in ~~January 2017. T~~he remaining $250 million payment is reported in other current liabilities in the accompanying consolidated balance sheets. The accretion of the discount is reported within net financing costs in the accompanying consolidated comprehensive statement of earnings.

In August 2016, EnLink formed a joint venture to operate and expand its midstream assets in the Delaware Basin. The joint venture is initially owned 50.1% by EnLink and 49.9% by the joint venture partner. EnLink contributed approximately $244 million of existing non-monetary assets to the joint venture and committed an additional $262 million in capital to fund potential future development projects and potential acquisitions. The joint venture partner committed an aggregate of approximately $400 million of capital, including initial cash contributions of approximately $138 million, and granted EnLink call rights beginning in 2021 to acquire increasing portions of the joint venture partner’s interest.

~~EnLink Asset Divestitures~~

D~~uring the first quarter of 2017, EnLink divested its ownership interest in Howard Energy Partners for approximately $190 million.~~

3.	~~Derivative Financial~~3.Derivative Financial Instruments

Objectives and Strategies

Devon ~~periodically~~ enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production to hedge future prices received. Additionally, Devon ~~and EnLink~~ periodically ~~enter~~enters into derivative financial instruments with respect to a portion of ~~their~~its oil, gas and NGL marketing activities. These commodity derivative financial instruments include financial price swaps, basis swaps and costless price collars. Devon periodically enters into interest rate swaps to manage its exposure to interest rate ~~volatility and foreign exchange forward contracts to manage its exposure to fluctuations in the U.S. and Canadian dollar exchange rates.~~volatility. As of ~~September 30, 2017,~~March 31, 2020, Devon did not have any open ~~foreign exchange~~interest rate swap contracts.

~~Table of Contents~~

~~DEVON ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

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

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

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, 2020, Devon neither held cash collateral of its counterparties 0r posted collateral to its counterparties.

Commodity Derivatives

As of ~~September 30, 2017,~~March 31, 2020, 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.~~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)

Q4 2017

82,167

$
53.87

79,200

$
45.51

$
57.41

Q1-Q4 2018

22,792

$
51.13

34,121

$
45.71

$
55.71

Q1-Q4 2019

1,356

$
49.79

2,096

$
44.10

$
54.10

	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)
Q2-Q4 2020		82,207	$	36.87		50,449	$	51.11	$	61.14
Q1-Q4 2021		11,649	$	36.77		15,964	$	41.24	$	51.24

Oil Basis Swaps

Period

Index

Volume (Bbls/d)

Weighted Average
Differential to WTI
($/Bbl)

Q4 2017

Midland Sweet

20,000

$
(0.41
)
Q4 2017

Western Canadian Select

87,304

$
(14.57
)
Q1-Q4 2018

Midland Sweet

23,000

$
(1.02
)
Q1-Q4 2018

Western Canadian Select

59,718

$
(14.85
)
Q1-Q4 2019

Midland Sweet

1,000

$
(0.80
)

	Oil Basis Swaps
Period	Index	Volume (Bbls/d)		Weighted Average Differential to WTI ($/Bbl)
Q2-Q4 2020	Argus MEH		50,916	$	0.45
Q2-Q4 2020	Midland Sweet		31,782	$	(1.23	)
Q2-Q4 2020	NYMEX Roll		52,676	$	0.38
Q1-Q4 2021	Midland Sweet		7,000	$	1.27

As of ~~September 30, 2017,~~March 31, 2020, 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)

Q4 2017

331,196

$
3.21

455,000

$
3.03

$
3.41

Q1-Q4 2018

261,888

$
3.09

149,982

$
2.99

$
3.30

Q1-Q4 2019

6,164

$
3.08

8,630

$
2.92

$
3.22

	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 2020		65,396	$	2.75		171,418	$	1.89	$	2.37
Q1-Q4 2021		—	$	—		22,438	$	2.06	$	2.56

	Natural Gas Basis Swaps
Period	Index	Volume (MMBtu/d)		Weighted Average Differential to Henry Hub ($/MMBtu)
Q2-Q4 2020	Panhandle Eastern Pipe Line		30,000	$	(0.47	)
Q2-Q4 2020	El Paso Natural Gas		65,000	$	(0.78	)
Q2-Q4 2020	Houston Ship Channel		30,000	$	(0.02	)
Q1-Q4 2021	El Paso Natural Gas		35,000	$	(0.92	)

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Natural Gas Basis Swaps

Period

Index

Volume
(MMBtu/d)

Weighted Average
Differential to
Henry Hub
($/MMBtu)

Q4 2017

Panhandle Eastern Pipe Line

150,000

$
(0.34
)
Q4 2017

El Paso Natural Gas

80,000

$
(0.13
)
Q4 2017

Houston Ship Channel

35,000

$
0.06

Q4 2017

Transco Zone 4

205,000

$
0.03

Q1-Q4 2018

Panhandle Eastern Pipe Line

50,000

$
(0.29
)

As of ~~September 30, 2017,~~March 31, 2020, Devon had the following open NGL derivative positions. Devon’s NGL positions settle against the average of the prompt month OPIS Mont Belvieu, Texas index.

		Price Swaps				Price Collars							Price Swaps
Period	Product	Volume (Bbls/d)		Weighted Average Price ($/Bbl)		Volume (Bbls/d)		Weighted Average Floor Price ($/Bbl)		Weighted Average Ceiling Price ($/Bbl)		Product	Volume (Bbls/d)		Weighted Average Price ($/Bbl)
Q4 2017	Propane		2,663	$	31.98		1,000	$	28.35	$	30.45
Q2-Q4 2020												Ethane		9,982	$	5.62
Q2-Q4 2020												Natural Gasoline		1,000	$	44.84
Q2-Q4 2020												Normal Butane		1,500	$	23.56
Q2-Q4 2020												Propane		4,500	$	25.18

As of September 30, 2017, EnLink had the following open derivative positions associated with gas processing and fractionation. EnLink’s NGL positions settle by purity product against the average of the prompt month OPIS Mont Belvieu, Texas index.

~~Period~~	~~Product~~	~~Volume (Total)~~			~~Weighted Average Price Paid~~	~~Weighted Average Price Received~~
~~Q4 2017-Q3 2018~~	~~Propane~~		~~537~~	~~MBbls~~	~~Index~~	~~$0.66/gal~~
~~Q4 2017-Q3 2018~~	~~Normal Butane~~		~~344~~	~~MBbls~~	~~Index~~	~~$0.77/gal~~

~~Interest Rate Derivatives~~

~~As of September 30, 2017, Devon had the following open interest rate derivative positions:~~

Notional

Rate Received

Rate Paid

Expiration
(Millions)

$
750

Three Month LIBOR

2.98%

December 2048 ⁽¹⁾
$
100

1.76%

Three Month LIBOR

January 2019

~~(1)~~

~~Mandatory settlement in December 2018.~~

~~Table of Contents~~

~~DEVON ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

Financial Statement Presentation

The following table presents the net gains and losses by derivative financial instrument type followed by the corresponding individual consolidated ~~comprehensive~~ statements of comprehensive earnings caption.

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

(Millions)

Commodity derivatives:

Oil, gas and NGL derivatives

$
(144
)

$
79

$
214

$
(30
)
Marketing and midstream revenues

(5
)

(1
)

3

(7
)
Interest rate derivatives:

Other nonoperating items

(4
)

(20
)

(19
)

(163
)
Foreign currency derivatives:

Other nonoperating items

—

—

—

(159
)
Net gains (losses) recognized

$
(153
)

$
58

$
198

$
(359
)

	Three Months Ended March 31,
	2020		2019
Commodity derivatives:
Upstream revenues	$	720	$	(605	)
Marketing and midstream revenues		—		1
Net gains (losses) recognized	$	720	$	(604	)

The following table presents the derivative fair values by derivative financial instrument type followed by the corresponding individual consolidated balance ~~sheet~~sheets caption.

	September 30, 2017		December 31, 2016
	(Millions)				March 31, 2020		December 31, 2019
Commodity derivative assets:
Other current assets	$	39	$	9	$	616	$	49
Other long-term assets		4		1		27		1
Interest rate derivative assets:
Other current assets		1		1
Total derivative assets	$	44	$	11	$	643	$	50
Commodity derivative liabilities:
Other current liabilities	$	53	$	187	$	—	$	30
Other long-term liabilities		7		16		5		1
Interest rate derivative liabilities:
Other current liabilities		1		—
Other long-term liabilities		61		41
Total derivative liabilities	$	122	$	244	$	5	$	31

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

4.	~~Share-Based Compensation~~

In the second quarter of 2017, Devon’s stockholders approved the 2017 Plan. The 2017 Plan replaces the 2015 Plan. From the effective date of the 2017 Plan, no further awards may be made under the 2015 Plan, and awards previously granted will continue to be governed by the terms of the respective award documents. Subject to the terms of the 2017 Plan, awards may be made for a total of 33.5 million shares of Devon common stock, plus the number of shares available for issuance under the 2015 Plan (including shares subject to outstanding awards under the 2015 Plan that are transferred to the 2017 Plan in accordance with its terms). The 2017 Plan authorizes the4.Share-Based Compensation Committee, which consists of independent, non-management members of Devon’s Board of Directors, to grant nonqualified and incentive stock options, restricted stock awards or units, Canadian restricted stock units, performance units and stock appreciation rights to eligible employees. The 2017 Plan also authorizes the grant of nonqualified stock options, restricted stock awards or units and stock appreciation rights to non-employee directors. To calculate the number of shares that may be granted in awards under the 2017 Plan, options and stock appreciation rights represent one share and other awards represent 2.3 shares.

The ~~following~~ table below presents the ~~effects of~~ share-based compensation expense included in Devon’s accompanying consolidated ~~comprehensive~~ statements of comprehensive earnings. Gross G&A expense for the first nine months of 2017 and 2016 includes $28 million and $18 million, respectively, of unit-based compensation related to grants made under EnLink’s long-term incentive plans.

The vesting for certain share-based awards was accelerated in ~~2016 in~~ conjunction with the reduction of workforce described in Note ~~6. For the nine months ended September 30, 2016, approximately $60 million of associated expense for these accelerated awards~~6 and is included in restructuring and transaction costs in the accompanying consolidated ~~comprehensive~~ statements of ~~earnings.~~comprehensive earnings.

Nine Months Ended September 30,

2017

2016

(Millions)

Gross G&A for share-based compensation

$
141

$
117

Share-based compensation expense capitalized pursuant to
the full cost method of accounting for oil and gas properties

$
31

$
30

Related income tax benefit

$
3

$
3

	Three Months Ended March 31st,
	2020		2019
G&A	$	20	$	23
Restructuring and transaction costs		—		22
Total	$	20	$	45
Related income tax benefit	$	—	$	9

Under its approved long-term incentive plan, Devon granted share-based awards to certain employees in the first ~~nine~~three months of ~~2017.~~2020. The following table presents a summary of Devon’s unvested restricted stock awards, ~~and units,~~ performance-based restricted stock awards and performance share units granted under the plan.

	Restricted Stock					Performance-Based					Performance												Performance-Based					Performance
	Awards and Units					Restricted Stock Awards					Share Units							Restricted Stock Awards					Restricted Stock Awards					Share Units
	Awards and Units			Weighted Average Grant-Date Fair Value		Awards			Weighted Average Grant-Date Fair Value		Units					Weighted Average Grant-Date Fair Value		Awards			Weighted Average Grant-Date Fair Value		Awards			Weighted Average Grant-Date Fair Value		Units					Weighted Average Grant-Date Fair Value
	(Thousands, except fair value data)																	(Thousands, except fair value data)
Unvested at 12/31/16		6,407		$	34.40		585		$	37.60		2,604				$	46.66
Unvested at 12/31/19																			4,984		$	29.65		153		$	33.88		2,155				$	40.35
Granted		2,691		$	44.87		223		$	44.85		1,010				$	52.58		2,865		$	22.54		—		$	—		688				$	27.89
Vested		(2,321	)	$	39.51		(233	)	$	41.27		(832	)			$	78.19		(1,733	)	$	29.42		(105	)	$	29.12		(455	)			$	52.56
Forfeited		(252	)	$	36.06		—		$	—		(24	)			$	40.70		(29	)	$	28.05		—		$	—		(304	)			$	52.56
Unvested at 9/30/17		6,525		$	36.83		575		$	38.92		2,758		⁽¹	⁾	$	41.21
Unvested at 3/31/20																			6,087		$	26.37		48		$	44.12		2,084		⁽¹	⁾	$	31.79

(1)	A maximum of ~~5.5~~4.2 million common shares could be awarded based upon Devon’s final TSR ~~ranking relative to Devon’s peer group established under applicable award agreements.~~ranking.

The following table presents the assumptions related to the performance share units granted in ~~2017,~~2020, as indicated in the previous summary table.

	2017					2020
Grant-date fair value	$	51.05	—	$	53.12	$	27.89
Risk-free interest rate	1.50%					1.36%
Volatility factor	45.8%					38.4%
Contractual term (years)	2.89					2.89

~~Table of Contents~~

~~DEVON ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

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 ~~September 30, 2017.~~March 31, 2020.

			Performance-Based						Performance-Based
	Restricted Stock		Restricted Stock		Performance		Restricted Stock		Restricted Stock		Performance
	Awards and Units		Awards		Share Units		Awards		Awards		Share Units
Unrecognized compensation cost (millions)	$	160	$	6	$	35
Unrecognized compensation cost							$	120	$	—	$	25
Weighted average period for recognition (years)		2.5		1.8		2.0		2.9		1.2		1.8

~~EnLink Share-Based Awards~~

In March 2017, the General Partner and EnLink issued restricted incentive units as bonus payments to officers and certain employees. The combined grant fair value was $10 million, and the total cost was recognized in the first quarter

Table of ~~2017 due to the awards vesting immediately.~~Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

5.Asset Impairments

The following table presents a summary of Devon’s asset impairments. Unproved impairments shown below are included in exploration expenses in the ~~unrecognized compensation cost and the related weighted average recognition period associated with the General Partner’s and EnLink’s unvested restricted incentive units and performance units as~~consolidated statements of ~~September 30, 2017.~~comprehensive earnings.

General Partner

EnLink

Restricted

Performance

Restricted

Performance

Incentive Units

Units

Incentive Units

Units

Unrecognized compensation cost (millions)

$
14

$
6

$
15

$
6

Weighted average period for recognition (years)

1.8

2.0

1.7

1.9

	Three Months Ended March 31,
	2020		2019
Proved oil and gas assets	$	2,664	$	—
Other assets		2		—
Total asset impairments	$	2,666	$	—

Unproved impairments	$	110	$	1

5.	~~Asset Impairments~~

~~The following table presents the components of asset impairments.~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(Millions)

U.S. oil and gas assets

$
—

$
317

$
—

$
2,810

Canada oil and gas assets

—

—

—

1,166

EnLink goodwill

—

—

—

873

Other assets

2

2

9

2

Total asset impairments

$
2

$
319

$
9

$
4,851

Proved Oil and Gas and Other AssetImpairments

~~Under~~Reduced demand from the ~~full cost method~~COVID-19 pandemic caused an unprecedented downturn in the price of ~~accounting, capitalized costs~~oil. As a result, Devon reduced planned 2020 capital investment by 45%. With materially lower commodity prices and reduced near-term investment, Devon assessed all of its oil and gas ~~properties, net~~fields for impairment as of ~~accumulated DD&A~~March 31, 2020. For impairment determinations, Devon historically utilized NYMEX forward strip prices for the first five years and ~~deferred income taxes, may not exceed~~applied internally generated price forecasts for subsequent years. In response to the ~~full~~COVID-19 pandemic, the NYMEX forward market became highly illiquid as evidenced by materially reduced trading volumes for periods beyond 2021. Therefore, Devon supplemented the NYMEX forward strip prices with price forecasts published by reputable investment banks and reservoir engineering firms to estimate future revenues as of March 31, 2020. To measure indicated impairments, Devon used a market-based weighted-average cost ~~“ceiling” at~~of capital to discount the ~~end of each quarter. The ceiling is calculated separately for each country and is based on the present value of estimated~~ future net cash ~~flows from~~flows.

Devon recognized approximately $2.7 billion of proved ~~oil~~asset impairments during the first three months of 2020. These impairments related to the Anadarko Basin and ~~gas reserves, discounted at 10% per annum, net of related tax effects. Estimated future net cash flows are calculated using end-of-period costs~~Rockies fields in which the cost basis included acquisitions completed in 2016 and ~~an unweighted arithmetic average of~~2015, respectively, when commodity prices ~~in effect on the first day of each of the previous 12 months.~~

The oil and gas impairments in 2016 resulted from declines in the U.S. and Canada full cost ceilings. The lower ceiling values resulted primarily from significant decreases in the 12-month average trailing prices for oil, bitumen, gas and NGLs, which significantly reduced proved reserves values and, to a lesser degree, proved reserves.

~~EnLink Goodwill Impairments~~

were much higher than they are today. In the first quarter of ~~2016, EnLink~~2020, Devon recognized ~~goodwill~~$2 million of product line fill impairments. ~~See Note 12~~

UnprovedImpairments

Due to the recent downturn in the commodity price environment and reduced near-term investment as discussed above, Devon also recognized $110 million of unproved impairments during the first three months of 2020, primarily in the Rockies field. During the first three months of 2019, Devon allowed certain non-core acreage to expire without plans for ~~additional details.~~

~~Table~~development resulting in unproved impairments of ~~Contents~~

~~DEVON ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~$1 million.

6.Restructuring and Transaction Costs

~~The following table summarizes restructuring and transaction costs presented in the accompanying consolidated comprehensive statement of earnings.~~

September 30, 2016

Three Months Ended

Nine Months Ended

(Millions)

2016 reduction in workforce:

Employee related costs

$
(7
)

$
229

Lease obligations

—

17

Asset impairments

—

3

Transaction costs

2

17

Restructuring and transaction costs

$
(5
)

$
266

~~The following table summarizes Devon’s restructuring liabilities.~~

Other

Other

Current

Long-term

Liabilities

Liabilities

Total

(Millions)

Balance as of December 31, 2016

$
48

$
62

$
110

Changes due to 2016 workforce reductions

(25
)

(2
)

(27
)
Changes related to prior years' restructurings

(3
)

(24
)

(27
)
Balance as of September 30, 2017

$
20

$
36

$
56

Balance as of December 31, 2015

$
13

$
63

$
76

Changes due to 2016 workforce reductions

58

13

71

Changes related to prior years' restructurings

5

(8
)

(3
)
Balance as of September 30, 2016

$
76

$
68

$
144

~~Reduction in Workforce~~

InDuring the first ~~nine~~quarter of 2019, Devon announced workforce reductions and other initiatives designed to enhance its operational focus and cost structure in conjunction with the portfolio transformation announcement further discussed in Note 2. As a result, Devon recognized $51 million of restructuring expenses during the first three months of ~~2016, Devon recognized $229 million in employee-related costs associated with a reduction in workforce.~~2019. Of these ~~employee-related costs, approximately $60~~expenses, $22 million resulted from accelerated vesting of share-based grants, which are noncash charges. ~~Additionally, approximately $30 million resulted from estimated settlements of defined retirement benefits.~~

As a result of the reduction of workforce, Devon ceased using certain office space that was subject to non-cancellable operating lease arrangements. Devon recognized restructuring costs that represent the present value of its future obligations under the leases and impairment charges for leasehold improvements and furniture associated with the office space it ceased using.

~~Transaction Costs~~

~~In the first nine months of 2016, Devon and EnLink recognized transaction costs primarily associated with the closing of the acquisitions discussed in Note 2.~~

1815

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

The following table summarizes Devon’s restructuring liabilities.

	Other			Other
	Current			Long-term
	Liabilities			Liabilities			Total
	(Millions)
Balance as of December 31, 2019	$	20		$	1		$	21
Changes related to prior years' restructurings		(9	)		—			(9	)
Balance as of March 31, 2020	$	11		$	1		$	12

Balance as of December 31, 2018	$	39		$	3		$	42
Changes related to prior years' restructurings		12			(2	)		10
Balance as of March 31, 2019	$	51		$	1		$	52

7.Income Taxes

~~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 September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(Millions)

Current income tax expense

$
39

$
85

$
71

$
72

Deferred income tax expense (benefit)

(14
)

86

(20
)

(300
)
Total income tax expense (benefit)

$
25

$
171

$
51

$
(228
)

U.S. statutory income tax rate

35
%

35
%

35
%

35
%
Deferred tax asset valuation allowance

(9
%)

(35
%)

(25
%)

(20
%)
Non-deductible goodwill impairments

0
%

6
%

0
%

(9
%)
Change in unrecognized tax benefits

3
%

7
%

1
%

(2
%)
Taxation on Canadian operations

(1
%)

0
%

0
%

(3
%)
State income taxes

0
%

2
%

0
%

1
%
Other

(19
%)

0
%

(7
%)

3
%
Effective income tax rate

9
%

15
%

4
%

5
%

	Three Months Ended March 31,
	2020			2019
Loss from continuing operations before income taxes	$	(2,107	)	$	(497	)

Current income tax benefit	$	(106	)	$	(4	)
Deferred income tax benefit		(311	)		(115	)
Total income tax benefit	$	(417	)	$	(119	)

U.S. statutory income tax rate		21	%		21	%
State income taxes		1	%		6	%
Change in tax legislation		5	%		0	%
Other		(3	%)		(3	%)
Deferred tax asset valuation allowance		(4	%)		0	%
Effective income tax rate		20	%		24	%

Devon estimates its annual effective income tax rate ~~in recording~~to record its quarterly provision for income taxes in the various jurisdictions in which it operates. Statutory tax rate changes and other significant or unusual items are recognized as discrete items in the quarter in which they occur.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) became law on March 27, 2020. The CARES Act allows net operating losses generated in taxable years beginning after December 31, 2017 and before January 1, 2021 to be carried back five years to offset taxable income and generate a refund. Devon intends to carry net operating losses generated in 2019 and 2020 back to 2014 and 2015, respectively. As a result, Devon recorded a $96 million income tax benefit in Q1 2020, and expects to record an additional $9 million income tax benefit by the end of the year.

Throughout ~~2016~~2019, Devon maintained a valuation allowance against certain deferred tax assets, including certain tax credits and ~~through~~state net operating losses. Since then, reduced demand from the COVID-19 pandemic has caused an unprecedented downturn in the commodity price environment. As a result, Devon recorded significant impairments during the first ~~nine months~~quarter of ~~2017,~~ 2020 and is now in a net deferred tax asset position. Devon ~~continued to maintain~~reassessed its position and recorded a 100% valuation allowance against ~~its U.S.~~all net deferred tax assets ~~resulting from prior year cumulative financial losses largely due to full cost impairments. Furthermore, a partial allowance continues to be held against certain Canadian segment deferred tax assets.~~

~~Devon provided an additional $796 million to the U.S. segment valuation allowance in the first nine months~~as of ~~2016 based on the financial loss recorded during the period. Also, during the third quarter of 2016, Devon’s Canadian segment recorded a $71 million partial valuation allowance. Devon reduced~~March 31, 2020, increasing its ~~U.S. segment~~ valuation allowance by ~~$348 million~~$108 million.

Included in ~~the first nine months of 2017 based on the financial income recorded during the period.~~

~~Also~~“other” in the table above is the ~~“other” effect is primarily composed~~impact of ~~permanent differences for which dollar amounts do not increase or decrease in relation to the change in pre-tax earnings. Generally, such items have an insignificant impact on our effective income~~increasing Devon’s unrecognized tax ~~rate. However, these items have a more noticeable impact to our rate in the third quarter of 2017 due to lower relative earnings~~benefits by approximately $34 million during ~~the period. During the third quarter of 2017, “other” is primarily related to the taxation of foreign earnings and other financing items.~~

In the first quarter of ~~2016, EnLink recorded goodwill impairments totaling $873 million. These impairments are not deductible for purposes of calculating income tax and, therefore, have an impact on the effective tax rate.~~

Devon is under audit in the U.S. and various foreign jurisdictions as part of its normal course of business. The timing of resolution of income tax examinations is uncertain as are the amounts and timing of tax payments that are part of any audit settlement process. Devon believes that within the next 12 months it is reasonably possible that certain tax examinations will be resolved by settlement with the taxing authorities.2020.

1916

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

8.	Net Earnings (Loss) Per Share ~~Attributable to Devon~~from Continuing Operations

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

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
	(Millions, except per share amounts)
Net earnings (loss):
Net earnings (loss) attributable to Devon	$	228		$	993		$	1,218		$	(3,633	)
Net loss from continuing operations:
Net loss from continuing operations													$	(1,691	)	$	(378	)
Attributable to participating securities		(2	)		(11	)		(13	)		(1	)		(1	)		—
Basic and diluted earnings (loss)	$	226		$	982		$	1,205		$	(3,634	)
Basic and diluted loss from continuing operations													$	(1,692	)	$	(378	)
Common shares:
Common shares outstanding - total		526			524			525			509			383			434
Attributable to participating securities		(6	)		(6	)		(6	)		(6	)		(6	)		(6	)
Common shares outstanding - basic		520			518			519			503
Dilutive effect of potential common shares issuable		3			3			3			—
Common shares outstanding - diluted		523			521			522			503
Net earnings (loss) per share attributable to Devon:
Common shares outstanding - basic and diluted														377			428
Net loss per share from continuing operations:
Basic	$	0.43		$	1.90		$	2.32		$	(7.22	)	$	(4.48	)	$	(0.89	)
Diluted	$	0.43		$	1.89		$	2.31		$	(7.22	)	$	(4.48	)	$	(0.89	)
Antidilutive options ⁽¹⁾		2			3			2			3			—			1

(1)	Amounts represent options to purchase shares of Devon’s common stock that are excluded from the diluted net earnings ~~(loss)~~ per share calculations because the options are antidilutive.

9.	Other Comprehensive Earnings (Loss)

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

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(Millions)

Foreign currency translation:

Beginning accumulated foreign currency translation

$
456

$
450

$
456

$
424

Change in cumulative translation adjustment

17

(1
)

31

52

Income tax benefit (expense)

(16
)

3

(30
)

(24
)
Ending accumulated foreign currency translation

457

452

457

452

Pension and postretirement benefit plans:

Beginning accumulated pension and postretirement benefits

(163
)

(185
)

(172
)

(194
)
Recognition of net actuarial loss and prior
service cost in earnings ⁽¹⁾

5

7

14

20

Income tax benefit

—

4

—

—

Ending accumulated pension and postretirement benefits

(158
)

(174
)

(158
)

(174
)
Other

(2
)

—

(2
)

—

Accumulated other comprehensive earnings, net of tax

$
297

$
278

$
297

$
278

	Three Months Ended March 31,
	2020			2019
Foreign currency translation:
Beginning accumulated foreign currency translation and other	$	—		$	1,159
Change in cumulative translation adjustment		—			35
Ending accumulated foreign currency translation and other		—			1,194
Pension and postretirement benefit plans:
Beginning accumulated pension and postretirement benefits		(119	)		(132	)
Recognition of net actuarial loss and prior service cost in earnings ⁽¹⁾		2			3
Income tax expense		(1	)		(1	)
Ending accumulated pension and postretirement benefits		(118	)		(130	)
Accumulated other comprehensive earnings (loss), net of tax	$	(118	)	$	1,064

(1)	These accumulated other comprehensive earnings components are included in the computation of net periodic benefit cost, which is a component of ~~G&A on~~other expenses in the accompanying consolidated ~~comprehensive~~ statements of comprehensive earnings. ~~See Note 16 for additional details.~~

2017

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

10.	Supplemental Information to Statements of Cash Flows

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
	(Millions)
Net change in working capital accounts, net of assets and liabilities assumed:
Changes in assets and liabilities, net:
Accounts receivable	$	(215	)	$	81		$	(85	)	$	87		$	238		$	(29	)
Income taxes receivable		—			6			8			107
Income tax receivable														(113	)		—
Other current assets		12			98			(43	)		242			(38	)		9
Other long-term assets														(24	)		(8	)
Accounts payable		48			(34	)		98			(185	)		42			(51	)
Revenues and royalties payable		63			40			92			34			(113	)		46
Other current liabilities		99			(54	)		24			(77	)		(81	)		(23	)
Net change in working capital	$	7		$	137		$	94		$	208
Other long-term liabilities														33			(5	)
Total													$	(56	)	$	(61	)
Supplementary cash flow data - total operations:
Interest paid (net of capitalized interest)	$	49		$	113		$	285		$	402		$	64		$	53
Income taxes paid (received)	$	—		$	(7	)	$	(1)		$	(130	)
Income taxes paid													$	151		$	6

~~Devon’s acquisition of certain STACK assets during the first three months of 2016 included the noncash issuance of Devon common stock. See Note 2 for additional details.~~

EnLink’s acquisition of Anadarko Basin gathering and processing midstream assets during the first quarter of 2016 included the noncash issuance of General Partner common units. Additionally, EnLink’s formation of a joint venture during the third quarter of 2016 included non-monetary asset contributions. See Note 2 for additional details.

11.	Accounts Receivable

Components of accounts receivable include the following:

	September 30, 2017			December 31, 2016
	(Millions)						March 31, 2020			December 31, 2019
Oil, gas and NGL sales	$	528		$	487		$	235		$	452
Joint interest billings		111			110			147			168
Marketing and midstream revenues		792			708			149			207
Other		44			69			74			13
Gross accounts receivable		1,475			1,374			605			840
Allowance for doubtful accounts		(13	)		(18	)		(11	)		(8	)
Net accounts receivable	$	1,462		$	1,356		$	594		$	832

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.

	March 31, 2020			December 31, 2019
Property and equipment:
Proved	$	27,986		$	27,668
Unproved and properties under development		504			583
Total oil and gas		28,490			28,251
Less accumulated DD&A		(23,734	)		(20,693	)
Oil and gas property and equipment, net		4,756			7,558
Other property and equipment		1,732			1,725
Less accumulated DD&A		(708	)		(690	)
Other property and equipment, net ⁽¹⁾		1,024			1,035
Property and equipment, net	$	5,780		$	8,593

~~12.~~

~~Goodwill~~(1)

$89 million and ~~Other Intangible Assets~~$80 million related to CDM in 2020 and 2019, respectively.

~~Goodwill~~

During the first quarter of 2020, Devon ~~performs an annual impairment test~~recognized asset impairments of ~~goodwill at October 31, or more frequently if events or changes in circumstances indicate that~~$2.7 billion primarily related to proved oil and gas assets and $110 million of unproved impairments, which significantly reduced the carrying value of a reporting unit may not be recoverable. Sustained weakness in the overall energy sector driven by low commodity prices, together with a decline in EnLink’s unit price, caused a noncash goodwill impairment of $873 million in the first quarter of 2016. This consisted of a full impairment charge of $93 million related to EnLink’s Crudeits property and ~~Condensate reporting unit and partial impairments to EnLink’s Texas and General Partner reporting units of $473 million and $307 million, respectively.~~equipment, net. See Note 5 for additional details.

~~Asset Divestitures~~

~~During the third quarter of 2016, Devon derecognized $197 million of goodwill in conjunction with the upstream oil and gas asset divestitures discussed in Note 2.~~

2118

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DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~Other Intangible Assets~~

~~The following table presents other intangible assets reported in other long-term assets in the accompanying consolidated balance sheets.~~

September 30, 2017

December 31, 2016

(Millions)

Customer relationships

$
1,796

$
1,796

Accumulated amortization

(202
)

(172
)
Net intangibles

$
1,594

$
1,624

The weighted-average amortization period for other intangible assets is 15 years. Amortization expense for intangibles was $37 million and $29 million for the three months ended September 30, 2017 and 2016, respectively, and $96 million and $87 million for the nine months ended September 30, 2017 and 2016, respectively. The remaining amortization expense is estimated to be $123 million for each of the next five years.

13.	~~Other Current Liabilities~~

~~Components of other current liabilities include the following:~~

September 30, 2017

December 31, 2016

(Millions)

Installment payment - see Note 2
$
243

$
249

Accrued interest payable

204

130

Income taxes payable

197

32

Derivative liabilities

54

187

Restructuring liabilities

20

48

Other

285

420

Other current liabilities
$
1,003

$
1,066

~~14.~~

Debt and Related Expenses

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

September 30, 2017

December 31, 2016

(Millions)

Devon debt:

Debentures and notes

$
6,933

$
6,933

Net discount on debentures and notes

(30
)

(30
)
Debt issuance costs

(41
)

(44
)
Total Devon debt

6,862

6,859

EnLink debt:

Credit facilities

74

148

Debentures and notes

3,500

3,163

Net premium (discount) on debentures and notes

(6
)

9

Debt issuance costs

(27
)

(25
)
Total EnLink debt

3,541

3,295

Total debt

10,403

10,154

Less amount classified as short-term debt⁽¹⁾

20

—

Total long-term debt

$
10,383

$
10,154

~~(1)~~

~~Short-term debt as of September 30, 2017 consists of $20 million of 8.25% senior notes due July 1, 2018.~~

	March 31, 2020			December 31, 2019

5.85% due December 15, 2025	$	485		$	485
7.50% due September 15, 2027		73			73
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 discount on debentures and notes		(20	)		(20	)
Debt issuance costs		(34	)		(35	)
Total long-term debt	$	4,295		$	4,294

~~Table of Contents~~

~~DEVON ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

~~Credit Lines~~

Devon has a $3.0 billion Senior Credit Facility. As of ~~September 30, 2017,~~March 31, 2020, Devon had ~~$59~~0 outstanding borrowings under the Senior Credit Facility and had issued $2 million in outstanding letters of credit under ~~the Senior Credit Facility. There were no outstanding borrowings under the Senior Credit Facility at September 30, 2017.~~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 noncash financial write-downs such as ~~full cost ceiling impairments or goodwill~~ impairments. As of ~~September 30, 2017,~~March 31, 2020, Devon was in compliance with this covenant with a debt-to-capitalization ratio of ~~18.9%~~18.8%.

Retirement of Senior Notes

In January 2019, Devon repaid the third quarter of 2016, Devon completed tender offers to repurchase $1.2 billion of debt securities, using proceeds from the asset divestitures discussed in Note 2. Devon recognized a loss on early retirement of debt, primarily consisting of $82 million in cash retirement costs and other fees. These costs, along with other minimal noncash charges associated with retiring the debt, are included in net financing costs in the consolidated comprehensive statements of earnings.

~~EnLink Debt~~

~~All of EnLink’s and the General Partner’s debt is non-recourse to Devon.~~

EnLink has a $1.5 billion unsecured revolving credit facility. As of September 30, 2017, there were $9 million in outstanding letters of credit and no outstanding borrowings under the $1.5 billion credit facility. The General Partner has a $250 million secured revolving credit facility. As of September 30, 2017, the General Partner had $74 million in outstanding borrowings at an average rate of 3.2%. EnLink and the General Partner were in compliance with all financial covenants in their respective credit facilities as of September 30, 2017.

~~In the second quarter of 2017, EnLink issued $500~~$162 million of ~~5.45% unsecured~~6.30% senior notes due in 2047. The proceeds were used to repay outstanding borrowings under its revolving credit facility and for general partnership purposes. Additionally, in the second quarter of 2017, EnLink redeemed its $163 million 7.125% senior unsecured notes due in 2022. EnLink redeemed the notes at 103.6% of the principal amount, plus accrued unpaid interest, for aggregate cash consideration of $174 million, which resulted in a gain on extinguishment of debt of $9 million during the second quarter of 2017. The gain is included in net financing costs in the consolidated comprehensive statement of earnings.maturity.

Net Financing Costs

The following schedule includes the components of net financing costs.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Devon net financing costs:

Interest based on debt outstanding

$
97

$
120

$
292

$
376

Early retirement of debt

—

84

—

84

Capitalized interest

(19
)

(16
)

(53
)

(47
)
Other

(1
)

7

(3
)

18

Total Devon net financing costs

77

195

236

431

EnLink net financing costs:

Interest based on debt outstanding

43

37

125

105

Interest accretion on deferred installment payment

7

13

20

39

Early retirement of debt

—

—

(9
)

—

Other

—

(2
)

(2
)

(5
)
Total EnLink net financing costs

50

48

134

139

Total net financing costs

$
127

$
243

$
370

$
570

	Three Months Ended March 31,
	2020			2019
Interest based on debt outstanding	$	65		$	65
Interest income		(5	)		(11	)
Other		5			6
Total net financing costs	$	65		$	60

2314.Leases

The following table presents Devon’s right-of-use assets and lease liabilities as of March 31, 2020 and December 31, 2019.

	March 31, 2020						December 31, 2019
	Finance		Operating		Total		Finance		Operating		Total
Right-of-use assets	$	227	$	10	$	237	$	229	$	14	$	243
Lease liabilities:
Current lease liabilities ⁽¹⁾	$	7	$	7	$	14	$	7	$	10	$	17
Long-term lease liabilities		242		3		245		240		4		244
Total lease liabilities	$	249	$	10	$	259	$	247	$	14	$	261

(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.

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

15.	Asset Retirement Obligations

~~15. Asset Retirement Obligations~~

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

	Nine Months Ended September 30,
	2017			2016			Three Months Ended March 31,
	(Millions)						2020			2019
Asset retirement obligations as of beginning of period	$	1,272		$	1,414		$	398		$	484
Liabilities incurred and assumed through acquisitions		30			18
Liabilities incurred								6			4
Liabilities settled and divested		(53	)		(310	)		(13	)		(33	)
Revision of estimated obligation		(184	)		70			4			(62	)
Accretion expense on discounted obligation		47			58			5			6
Foreign currency translation adjustment		29			26
Asset retirement obligations as of end of period		1,141			1,276			400			399
Less current portion		41			46			14			15
Asset retirement obligations, long-term	$	1,100		$	1,230		$	386		$	384

During the first ~~quarter~~three months of ~~2017,~~2019, Devon reduced its ~~estimated~~ asset retirement obligations by ~~$184~~$62 million, primarily due to changes in the ~~assumed inflation rate~~future cost estimates and retirement dates for its oil and gas assets.

~~During~~ Additionally, during the first ~~nine~~three months of ~~2016,~~2019, Devon reduced its asset retirement ~~obligation~~obligations by ~~$285~~$29 million ~~for those obligations that were assumed by purchasers~~as a result of ~~certain upstream U.S. assets. See~~ the non-core asset divestitures. For additional information, see Note 2 ~~for additional details.~~.

16.	~~Retirement Plans~~

~~The following table presents the components of net periodic benefit cost for Devon’s pension and postretirement benefit plans.~~

Pension Benefits

Postretirement Benefits

Three Months Ended

Nine Months Ended

Three Months Ended

Nine Months Ended

September 30,

September 30,

September 30,

September 30,

2017

2016

2017

2016

2017

2016

2017

2016

(Millions)

Service cost

$
4

$
3

$
12

$
12

$
—

$
—

$
—

$
—

Interest cost

11

9

32

32

—

—

—

—

Expected return on plan assets

(14
)

(14
)

(41
)

(40
)

—

—

—

—

Amortization of prior service cost ⁽¹⁾

—

1

1

2

—

—

(1
)

(1
)
Net actuarial loss ⁽¹⁾

5

6

14

19

—

—

—

—

Net periodic benefit cost ⁽²⁾

$
6

$
5

$
18

$
25

$
—

$
—

$
(1
)

$
(1
)

~~(1)~~

~~These net periodic benefit costs were reclassified out of other comprehensive earnings in the current period.~~

~~(2) Net periodic benefit cost is a component of G&A in the accompanying consolidated comprehensive statements of earnings.~~

~~17.~~

Stockholders’ Equity

~~Common Stock Issued~~Share Repurchase Programs

In ~~January 2016,~~March 2018, Devon ~~issued approximately 23~~announced a $1.0 billion share repurchase program. In June 2018, Devon announced the expansion of this program to $4.0 billion. In February 2019, Devon announced a further expansion to $5.0 billion with a December 31, 2019 expiration date. In December 2019, Devon announced a new $1.0 billion share repurchase program with a December 31, 2020 expiration date. Under the new program, $800 million ~~shares~~ of the $1.0 billion authorization is conditioned upon the closing of the Barnett Shale divestiture for cash proceeds of at least $725 million. Due to the amended terms of the Barnett Shale divestiture with BKV, which reduced the closing payment to $570 million and extended the closing date to December 31, 2020, Devon does not anticipate being able to repurchase more than $200 million of the $1.0 billion authorization before the program expiration date. As the pricing and economic environment has changed due to the COVID-19 pandemic and demand challenges for commodities, Devon has temporarily suspended its share repurchase program to preserve liquidity.

The table below provides information regarding purchases of Devon’s common stock that were made under the respective share repurchase programs (shares in ~~conjunction with~~thousands).

	Total Number of Shares Purchased		Dollar Value of Shares Purchased		Average Price Paid per Share
$5.0 Billion Plan
Full year 2018		78,149	$	2,978	$	38.11
First quarter 2019		36,141		1,024		28.33
Second quarter 2019		5,911		159		27.01
Third quarter 2019		22,137		550		24.80
Fourth quarter 2019		4,436		94		21.32
Total inception-to-date		146,774	$	4,805	$	32.74

$1.0 Billion Plan
First quarter 2020		2,243	$	38	$	16.85
Total inception-to-date		2,243	$	38	$	16.85

Dividends

Devon paid common stock dividends of $34 million ($0.09 per share) and $34 million ($0.08 per share) during the ~~STACK asset acquisition discussed in Note 2.~~

first three months of 2020 and 2019, respectively. In February ~~2016,~~2020, Devon ~~issued 79 million shares of common stock~~announced a 22% increase to ~~the public, inclusive of 10 million shares sold as part of the underwriters’ option. Net proceeds from the offering were $1.5 billion.~~its quarterly dividend, to $0.11 per

2420

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~Dividends~~

~~The table below summarizes the dividends Devon paid on its common stock.~~

Amounts

Rate

(Millions)

(Per Share)

Quarter Ended 2017:

First quarter 2017
$
32

$
0.06

Second quarter 2017

33

$
0.06

Third quarter 2017

30

$
0.06

Total year-to-date
$
95

Quarter Ended 2016:

First quarter 2016
$
125

$
0.24

Second quarter 2016

33

$
0.06

Third quarter 2016

32

$
0.06

Total year-to-date
$
190

~~In response to the depressed commodity price environment, Devon reduced its quarterly dividend to $0.06 per~~ share, beginning in the second quarter of ~~2016.~~2020. In the second quarter of 2019, Devon raised its quarterly dividend from $0.08 to $0.09 per share.

~~18.~~17.

~~Noncontrolling Interests~~Discontinued Operations and Assets Held For Sale

~~Subsidiary Equity Transactions~~

~~EnLink has the ability~~Barnett Shale

In 2019, Devon announced that it had entered into an agreement to sell ~~common units through~~ its ~~“at~~Barnett Shale assets to BKV and subsequently amended the ~~market” equity offering programs.~~ agreement in April 2020. Under the amended terms, Devon has agreed to sell its Barnett Shale assets for $570 million in cash, before purchase price adjustments, at closing, which was extended to December 31, 2020. Additionally, the agreement provides for contingent earnout payments to Devon of up to $260 million based upon future commodity prices, with upside participation beginning at a $2.75 Henry Hub natural gas price or a $50 WTI oil price. The contingent payment period commences on January 1, 2021 and has a term of four years. Under the terms of the agreement, Devon received the deposit funds of $170 million in April 2020. The deposit is being held by Devon pursuant to the terms of the sale agreement, which only requires Devon to return such funds to BKV in the event the transaction does not close as a result of Devon’s breach of its closing obligations.

In connection with the announced sale of its Barnett Shale assets, approximately $88 million of the U.S. reporting unit goodwill was allocated to the Barnett Shale assets. Additionally, Devon ceased depreciation for all property, plant and equipment classified as assets held for sale on the date the sales agreement was approved by the Board of Directors. Devon also recognized a $748 million asset impairment in the fourth quarter of 2019 related to these assets, primarily due to the difference between the net carrying value and the purchase price, net of estimated customary purchase price adjustments. During the first quarter of 2020, Devon adjusted the estimated impairment $179 million, primarily due to the amended agreement terms. The valuation of the future contingent earnout payments included in the March 31, 2020 Barnett Shale impairment computation was $41 million. The value was derived utilizing a Monte Carlo valuation model and qualifies as a level 3 fair value measurement.

As of March 31, 2020, Devon has restricted approximately $25 million to fund obligations in connection with the abandonment of certain gas processing contracts related to the 2018 divestitures. Cash payments for these charges total approximately $2 million per quarter.

Canada

On June 27, 2019, Devon completed the sale of its Canadian business for $2.6 billion ($3.4 billion Canadian dollars), net of purchase price adjustments, and recognized a pre-tax gain of $223 million ($425 million net of tax, primarily due to a significant deferred tax benefit). Current (cash) income tax associated with the sale was approximately $150 million and was paid in the first quarter of 2020.The disposition of substantially all of Devon’s Canadian oil and gas assets resulted in Devon releasing its historical cumulative foreign currency translation adjustment of $1.2 billion from accumulated other comprehensive earnings to be included within the gain computation. The historical cumulative foreign currency translation portion of the gain is not taxable.

During the third quarter of ~~2017, EnLink entered into additional equity distribution agreements~~2019, Devon utilized a portion of the sales proceeds to ~~sell up to $600~~early retire its $500 million of the 4.00% senior notes due July 15, 2021 and $1.0 billion of the 3.25% senior notes due May 15, 2022. Devon recognized a charge on the early retirement of these notes consisting of $52 million in ~~common units through its programs. Future common units that EnLink issues will be issued under the new equity distribution agreement. During the first nine months~~cash retirement costs and $6 million of ~~2017, EnLink issued and sold 5 million common units through its programs and generated $92 million in net proceeds.~~

~~In September 2017, EnLink issued 400,000 preferred units through an underwritten public offering for net proceeds of approximately $394 million.~~

During the first nine months of 2016, EnLink issued and sold 7 million common units for net proceeds of $110 million. In conjunction with its acquisition of Anadarko Basin gathering and processing midstream assets during the first quarter of 2016, EnLink issued preferred units as discussed in Note 2.

As of September 30, 2017, Devon’s ownership interest in EnLink was 23%, excluding the interest held by the General Partner. Devon’s controlling ownership interest in the General Partner as of September 30, 2017 was 64%. The net gains and losses and related income taxes resulting from these transactions have been recorded as an adjustment to equity, with the change in ownership reflected as an adjustment to noncontrolling interests.

~~Distributions to Noncontrolling Interests~~

~~EnLink and the General Partner distributed $247 million and $224 million to non-Devon unitholders during the first nine months of 2017 and 2016, respectively.~~noncash charges.

As of March 31, 2020, $175 million of the Canadian cash balance is restricted for funding other obligations retained related to the Canadian business and is classified as cash restricted for discontinued operations on the consolidated balance sheets. The remaining obligations consist of a firm transportation agreement and office leases. Cash payments for these charges total approximately $6 million per quarter.

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

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

Three Months Ended March 31,	Barnett Shale			Canada			Total
2020
Upstream revenues	$	92		$	—		$	92
Total revenues		92			—			92
Production expenses		74			—			74
Asset impairments		179			—			179
General and administrative expenses		—			1			1
Financing costs, net		—			(2	)		(2	)
Other expenses		(13	)		10			(3	)
Total expenses		240			9			249
Loss from discontinued operations before income taxes		(148	)		(9	)		(157	)
Income tax benefit		(32	)		—			(32	)
Net loss from discontinued operations, net of tax	$	(116	)	$	(9	)	$	(125	)
2019
Upstream revenues	$	149		$	247		$	396
Marketing and midstream revenues		—			26			26
Total revenues		149			273			422
Production expenses		81			141			222
Exploration expenses		—			9			9
Marketing and midstream expenses		—			9			9
Depreciation, depletion and amortization		20			79			99
Asset dispositions		1			—			1
General and administrative expenses		—			18			18
Financing costs, net		—			13			13
Restructuring and transaction costs		—			3			3
Other expenses		6			(28	)		(22	)
Total expenses		108			244			352
Earnings from discontinued operations before income taxes		41			29			70
Income tax expense		9			—			9
Net earnings from discontinued operations, net of tax	$	32		$	29		$	61

The following table presents the carrying amounts of the assets and liabilities associated with discontinued operations on the consolidated balance sheets.

	As of March 31, 2020						As of December 31, 2019
	Barnett Shale		Canada		Total		Barnett Shale		Canada		Total
Cash restricted for discontinued operations	$	25	$	175	$	200	$	25	$	355	$	380

Accounts receivable	$	36	$	1	$	37	$	38	$	1	$	39
Other current assets		5		2		7		5		2		7
Oil and gas property and equipment, based on successful efforts accounting, net		593		—		593		751		—		751
Other property and equipment, net		11		—		11		11		—		11
Goodwill		88		—		88		88		—		88
Other long-term assets		—		74		74		—		81		81
Total assets associated with discontinued operations	$	733	$	77	$	810	$	893	$	84	$	977

Accounts payable	$	14	$	6	$	20	$	15	$	4	$	19
Revenues and royalties payable		36		3		39		44		3		47
Other current liabilities		21		73		94		19		233		252
Asset retirement obligations		141		—		141		141		—		141
Other long-term liabilities		15		148		163		16		169		185
Total liabilities associated with discontinued operations	$	227	$	230	$	457	$	235	$	409	$	644

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~19.~~18.

Commitments and Contingencies

Devon is party to various legal actions arising in the normal course of business. Matters that are probable of an 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.~~estimates.

~~Table of Contents~~

~~DEVON ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

Royalty Matters

Numerous oil and natural gas producers and related parties, including Devon, have been named in various lawsuits alleging royalty underpayments. ~~The~~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 ~~allege~~are claims that ~~the producers and related parties~~Devon used below-market prices, made improper deductions, 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. Devon does not currently believe that it is subject to material exposure with respect to such royalty matters.

Environmental and Other Matters

Devon is subject to certain ~~environmental, health and safety~~ laws and regulations ~~including with respect~~relating to environmental remediation activities associated with past operations, such as the Comprehensive Environmental Response, Compensation, and Liability Act and similar state statutes. In response to liabilities associated with these activities, loss accruals primarily consist of estimated uninsured remediation costs. Devon’s monetary exposure for environmental matters is not expected to be material.

~~Other Matters~~

Beginning in 2013, various parishes in Louisiana filed suit against more than 100 oil and gas companies, including Devon, alleging that the companies’ operations and activities in certain fields violated the State and Local Coastal Resource Management Act of 1978, as amended, and caused substantial environmental contamination, subsidence and other environmental damages to land and water bodies located in the coastal zone of Louisiana. The plaintiffs’ claims against Devon relate primarily to the operations of several of Devon’s corporate predecessors. The plaintiffs seek, among other things, the payment of the costs necessary to clear, re-vegetate and otherwise restore the allegedly impacted areas. Although Devon cannot predict the ultimate outcome of these matters, Devon is ~~involved~~vigorously defending against these claims.

Various municipalities and other governmental and private parties in ~~other various~~California have filed legal proceedings ~~incidental~~against certain oil and gas companies, including Devon, seeking relief to ~~its business. However,~~abate alleged impacts of climate change. These proceedings include far-reaching claims for monetary damages and injunctions against the production of all fossil fuels. Although Devon cannot predict the ultimate outcome of these matters,Devon believes these claims to ~~Devon’s knowledge, there were no other material pending legal proceedings~~be baseless and intends to ~~which Devon is a party or to which any~~vigorously defend against the proceedings.

Table of ~~its property is subject.~~Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~20.~~19.

Fair Value Measurements

The following table provides carrying value and fair value measurement information for certain of Devon’s financial assets and liabilities. ~~None of the items below are measured using Level 3 inputs.~~ The carrying values of cash, cash restricted for discontinued operations, accounts receivable, other current receivables, accounts payable, other current payables, ~~and~~ accrued expenses and lease liabilities included in the accompanying consolidated balance sheets approximated fair value at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016.~~2019, as applicable. Therefore, such financial assets and liabilities are not presented in the following table. Additionally, the fair values of oil and gas assets, goodwill and other intangible assets and related impairments are measured as of the impairment date using Level 3 inputs. More information on these items is provided in Note 5 and Note 12, respectively.table.

Fair Value

Measurements Using:

Carrying

Total Fair

Level 1

Level 2

Amount

Value

Inputs

Inputs

(Millions)

September 30, 2017 assets (liabilities):

Cash equivalents

$
1,510

$
1,510

$
1,431

$
79

Commodity derivatives

$
43

$
43

$
—

$
43

Commodity derivatives

$
(60
)

$
(60
)

$
—

$
(60
)
Interest rate derivatives

$
1

$
1

$
—

$
1

Interest rate derivatives

$
(62
)

$
(62
)

$
—

$
(62
)
Debt

$
(10,403
)

$
(11,480
)

$
—

$
(11,480
)
Installment payment

$
(243
)

$
(244
)

$
—

$
(244
)
Capital lease obligations

$
(4
)

$
(4
)

$
—

$
(4
)

December 31, 2016 assets (liabilities):

Cash equivalents

$
1,542

$
1,542

$
1,298

$
244

Commodity derivatives

$
10

$
10

$
—

$
10

Commodity derivatives

$
(203
)

$
(203
)

$
—

$
(203
)
Interest rate derivatives

$
1

$
1

$
—

$
1

Interest rate derivatives

$
(41
)

$
(41
)

$
—

$
(41
)
Debt

$
(10,154
)

$
(10,760
)

$
—

$
(10,760
)
Installment payment

$
(473
)

$
(477
)

$
—

$
(477
)
Capital lease obligations

$
(7
)

$
(6
)

$
—

$
(6
)

							Fair Value Measurements Using:
	Carrying			Total Fair			Level 1		Level 2
	Amount			Value			Inputs		Inputs
March 31, 2020 assets (liabilities):
Cash equivalents	$	890		$	890		$	890	$	—
Commodity derivatives	$	643		$	643		$	—	$	643
Commodity derivatives	$	(5	)	$	(5	)	$	—	$	(5	)
Debt	$	(4,295	)	$	(3,118	)	$	—	$	(3,118	)
December 31, 2019 assets (liabilities):
Cash equivalents	$	702		$	702		$	702	$	—
Commodity derivatives	$	50		$	50		$	—	$	50
Commodity derivatives	$	(31	)	$	(31	)	$	—	$	(31	)
Debt	$	(4,294	)	$	(5,376	)	$	—	$	(5,376	)

~~Table of Contents~~

~~DEVON ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

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 ~~U.S. and Canadian treasury securities. The~~the fair value approximates the carrying value.

Level 2 Fair Value Measurements

~~Cash equivalents~~

Commodity derivatives – ~~Amounts consist primarily of commercial paper and Canadian agency and provincial securities investments.~~ The fair value ~~approximates the carrying value.~~

~~Commodity and interest rate derivatives~~ ~~– The fair values~~ of commodity ~~and interest rate~~ derivatives ~~are~~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 actively trade in an established market. The fair values of its debt are estimated based on rates available for debt with similar terms and maturity. ~~The fair value of the credit facility balance is the carrying value.~~

~~Installment payment~~ ~~– The fair value of the EnLink installment payment was based on Level 2 inputs from third-party market quotations.~~

~~Capital lease obligations~~ ~~– The fair value was calculated using inputs from third-party banks.~~

~~21.~~

~~Segment Information~~

Devon manages its operations through distinct operating segments, which are defined primarily by geographic areas. For financial reporting purposes, Devon aggregates its U.S. operating segments into one reporting segment due to the similar nature of the businesses. However, Devon’s Canadian E&P operating segment is reported as a separate reporting segment primarily due to the significant differences between the U.S. and Canadian regulatory environments. Devon’s U.S. and Canadian segments are both primarily engaged in oil and gas E&P activities.

Devon considers EnLink, combined with the General Partner, to be an operating segment that is distinct from the U.S. and Canadian operating segments. EnLink’s operations consist of midstream assets and operations located across the U.S. Additionally, EnLink has a management team that is primarily responsible for capital and resource allocation decisions. Therefore, EnLink is presented as a separate reporting segment.

2724

Table of Contents

~~DEVON ENERGY CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Unaudited)~~

U.S.

Canada

EnLink

Eliminations

Total

(Millions)

Three Months Ended September 30, 2017:

Revenues from external customers

$
1,575

$
358

$
1,223

$
—

$
3,156

Asset dispositions and other

$
1

$
—

$
(1
)

$
—

$
—

Intersegment revenues

$
—

$
—

$
174

$
(174
)

$
—

Depreciation, depletion and amortization

$
195

$
63

$
142

$
—

$
400

Interest expense

$
82

$
17

$
49

$
(15
)

$
133

Asset impairments

$
—

$
—

$
2

$
—

$
2

Earnings before income taxes

$
167

$
85

$
20

$
—

$
272

Income tax expense

$
(5
)

$
28

$
2

$
—

$
25

Net earnings

$
172

$
57

$
18

$
—

$
247

Net earnings attributable to noncontrolling interests

$
—

$
—

$
19

$
—

$
19

Net earnings (loss) attributable to Devon

$
172

$
57

$
(1
)

$
—

$
228

Capital expenditures, including acquisitions

$
560

$
103

$
170

$
—

$
833

Three Months Ended September 30, 2016:

Revenues from external customers

$
1,653

$
305

$
924

$
—

$
2,882

Asset dispositions and other

$
1,351

$
—

$
—

$
—

$
1,351

Intersegment revenues

$
—

$
—

$
180

$
(180
)

$
—

Depreciation, depletion and amortization

$
196

$
72

$
126

$
—

$
394

Interest expense

$
185

$
34

$
49

$
(23
)

$
245

Asset impairments

$
317

$
2

$
—

$
—

$
319

Restructuring and transaction costs

$
(10
)

$
5

$
—

$
—

$
(5
)
Earnings before income taxes

$
1,122

$
37

$
19

$
—

$
1,178

Income tax expense

$
5

$
159

$
7

$
—

$
171

Net earnings (loss)

$
1,117

$
(122
)

$
12

$
—

$
1,007

Net earnings attributable to noncontrolling interests

$
—

$
—

$
14

$
—

$
14

Net earnings (loss) attributable to Devon

$
1,117

$
(122
)

$
(2
)

$
—

$
993

Capital expenditures, including acquisitions

$
277

$
48

$
132

$
—

$
457

Nine Months Ended September 30, 2017:

Revenues from external customers

$
5,547

$
951

$
3,468

$
—

$
9,966

Asset dispositions and other

$
11

$
—

$
(1
)

$
—

$
10

Intersegment revenues

$
—

$
—

$
515

$
(515
)

$
—

Depreciation, depletion and amortization

$
556

$
199

$
407

$
—

$
1,162

Interest expense

$
243

$
48

$
133

$
(42
)

$
382

Asset impairments

$
—

$
—

$
9

$
—

$
9

Earnings before income taxes

$
1,133

$
126

$
69

$
—

$
1,328

Income tax expense

$
—

$
42

$
9

$
—

$
51

Net earnings

$
1,133

$
84

$
60

$
—

$
1,277

Net earnings attributable to noncontrolling interests

$
—

$
—

$
59

$
—

$
59

Net earnings attributable to Devon

$
1,133

$
84

$
1

$
—

$
1,218

Property and equipment, net

$
7,726

$
2,787

$
6,569

$
—

$
17,082

Total assets

$
13,302

$
3,761

$
10,548

$
(52
)

$
27,559

Capital expenditures, including acquisitions

$
1,460

$
275

$
636

$
—

$
2,371

Nine Months Ended September 30, 2016:

Revenues from external customers

$
4,320

$
688

$
2,488

$
—

$
7,496

Asset dispositions and other

$
1,351

$
—

$
—

$
—

$
1,351

Intersegment revenues

$
—

$
—

$
539

$
(539
)

$
—

Depreciation, depletion and amortization

$
763

$
284

$
373

$
—

$
1,420

Interest expense

$
400

$
101

$
140

$
(66
)

$
575

Asset impairments

$
2,810

$
1,168

$
873

$
—

$
4,851

Restructuring and transaction costs

$
245

$
15

$
6

$
—

$
266

Loss before income taxes

$
(2,040
)

$
(1,359
)

$
(853
)

$
—

$
(4,252
)
Income tax expense (benefit)

$
(6
)

$
(223
)

$
1

$
—

$
(228
)
Net loss

$
(2,034
)

$
(1,136
)

$
(854
)

$
—

$
(4,024
)
Net earnings (loss) attributable to noncontrolling interests

$
1

$
—

$
(392
)

$
—

$
(391
)
Net loss attributable to Devon

$
(2,035
)

$
(1,136
)

$
(462
)

$
—

$
(3,633
)
Property and equipment, net

$
7,196

$
2,778

$
6,195

$
—

$
16,169

Total assets

$
12,317

$
4,355

$
10,197

$
(56
)

$
26,813

Capital expenditures, including acquisitions

$
2,454

$
158

$
816

$
—

$
3,428

~~Table of Contents~~

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 ~~and capital resources and uses~~ for the three-month ~~and nine-month periods~~period ended ~~September 30, 2017~~March 31, 2020 compared to ~~the three-month and nine-month~~previous periods ~~ended September 30, 2016~~ and in our financial condition and liquidity since December 31, ~~2016.~~2019. For information regarding our critical accounting policies and estimates, see our ~~2016~~2019 Annual Report on Form 10-K under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

~~Overview~~COVID – 19

A novel strain of ~~2017 Results~~

~~Key components~~coronavirus, SARS-CoV-2, causing a disease referred to as COVID-19, was reported to have surfaced in China in late 2019 and has subsequently spread to multiple countries worldwide, resulting in a global pandemic and health crisis. Devon began actively monitoring COVID-19 in January 2020 and formally established a COVID-19 cross-functional planning team at the beginning of March. The COVID-19 team is focused on two key priorities: the health and safety of our ~~financial performance are summarized below.~~employees and contractors and the uninterrupted operation of our business.

Three Months Ended September 30,

Nine Months Ended September 30, ⁽³⁾

2017

2016

Change

2017

2016

Change

(Millions, except per share amounts)

Net earnings (loss) attributable to Devon

$
228

$
993

- 77
%

$
1,218

$
(3,633
)

N/M

Net earnings (loss) per diluted share attributable to Devon

$
0.43

$
1.89

- 77
%

$
2.31

$
(7.22
)

N/M

Core earnings (loss) attributable to Devon⁽¹⁾

$
242

$
47

+415
%

$
636

$
(169
)

N/M

Core earnings (loss) per diluted share attributable to Devon ⁽¹⁾

$
0.46

$
0.09

+411
%

$
1.20

$
(0.34
)

N/M

Retained production (MBoe/d)

527

550

- 4
%

542

578

- 6
%
Total production (MBoe/d)

527

577

- 9
%

542

635

- 15
%
Realized price per Boe ⁽²⁾

$
25.67

$
20.98

+22
%

$
25.41

$
17.37

+46
%
Operating cash flow

$
776

$
727

+7
%

$
2,420

$
1,237

+96
%
Capital expenditures, including acquisitions

$
833

$
457

+82
%

$
2,371

$
3,428

- 31
%
Shareholder and noncontrolling interests distributions

$
114

$
109

+5
%

$
342

$
414

- 17
%
Cash and cash equivalents

$
2,781

$
2,385

+17
%
Total debt

$
10,403

$
11,354

- 8
%

•

Health and safety – The COVID-19 team has developed and implemented a number of safety measures, which have successfully kept our workforce healthy and safe. The COVID-19 team has established an informational campaign to provide employees an understanding of the virus risk factors and safety measures, as well as timely updates from governmental stay-at-home regulations. Expectations have also been set for employees to communicate immediately if they, or someone they have been in contact with, has tested positive for COVID-19. Other measures included closing all of Devon’s office buildings and locations to the public, implementing social distancing and encouraging employees to work from home. Beginning in late March, more than 90% of the workforce assigned to Devon’s Oklahoma City Headquarters office were primarily working from home. The COVID-19 team has also implemented targeted and routine intensive and deep cleaning of all Devon office locations.

~~(1)~~

~~Core earnings (loss)~~•

Uninterrupted operation of our business – Beyond workforce safety measures, the COVID-19 team has worked with government officials to ensure our business continues to be deemed an essential business or infrastructure. The COVID-19 team has ensured technology and ~~core earnings (loss) per diluted share attributable~~resources are available for employees to ~~Devon are financial~~execute their job duties while working from home and implemented further social distancing and contactless initiatives in our oil and gas field operations. The collective efforts of our COVID-19 team and our entire workforce have enabled us to avoid the need to implement COVID-19 containment or mitigation measures, ~~not prepared in accordance~~which would require closure or suspension of any of our operations.

This outbreak and the related responses of governmental authorities and others to limit the spread of the virus have significantly reduced global economic activity, resulting in an unprecedented decline in the demand for oil and other commodities. This supply-and-demand imbalance has been exacerbated by uncertainty regarding the future global supply of oil due to disputes between Russia and the members of OPEC, particularly Saudi Arabia, in March 2020. These factors caused a swift and material deterioration in commodity prices in early 2020, with NYMEX WTI oil prices falling from over $60/Bbl at the beginning of year to below $20/Bbl in April 2020. The current supply-and-demand imbalance has also imposed constraints on Devon’s and other operators’ ability to store and move production to downstream markets, which has resulted in the delay or curtailment of development activity, as well as the shutting-in of producing wells.

In response to the current macro-economic environment, we are protecting our financial strength and liquidity as evidenced by the following items:

•

Maintained significant liquidity with ~~GAAP. For a description~~$1.7 billion of ~~core earnings (loss)~~cash, inclusive of $200 million restricted for discontinued operations, $3.0 billion of available credit under our Senior Credit Facility and ~~core earnings (loss) per diluted share attributable to Devon, as well as reconciliations to~~no outstanding debt maturities occurring until the ~~comparable GAAP measures, see “Non-GAAP Measures” in this Item 2.~~end of 2025.

~~(2)~~

~~Excludes any impact of oil, gas~~•

Reduced 2020 capital expenditures outlook by approximately $800 million, or 45% compared to original capital budget, and ~~NGL derivatives.~~expect to fund 2020 capital program within operating cash flows even at current depressed commodity prices.

~~(3)~~

~~Except~~•

Amended the sale of our Barnett Shale assets for ~~balance sheet amounts, which~~$570 million in cash at closing and contingent payments of up to $260 million, with a close date of December 31, 2020.

•

Temporarily suspended our share repurchase program to preserve liquidity.

•

Hedged approximately 90% and 45% of our remaining 2020 oil and gas production at an average floor price of $42/Bbl and $2.15/Mcf, respectively. Additionally, we are ~~presented as of September 30.~~currently building our 2021 hedge positions at market prices.

•

Evaluating and shutting-in wells based on a variable cost analysis and other factors.

Overview of 2020 Results

~~During~~

We operate under a disciplined returns-driven strategy focused on delivering strong operational results, financial strength and value to our shareholders and continuing our commitment to environmental, social and governance excellence, which provides us with

Table of Contents

a strong foundation to grow returns, margin and profitability. We continue to execute on our strategy and navigate through the challenged economic environment by protecting our financial strength, tailoring our capital investment to market conditions, improving our cash cost structure and preserving operational continuity.

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

Our net earnings in recent quarters have been significantly impacted by divestiture transactions, asset impairments and temporary, noncash adjustments to the value of our commodity hedges. Net earnings in the first ~~nine months~~quarter of ~~2017, we generated solid operating~~2020 included $2.3 billion of asset impairments on our proved and unproved properties and a $0.5 billion hedge valuation gain, both net of taxes. Net earnings in the fourth quarter of 2019 included $0.6 billion of asset impairments and a $0.1 billion hedge valuation loss, both net of taxes. Net earnings in the second quarter of 2019 included $0.3 billion for net after-tax gains and charges related to our Canadian disposition. Net earnings in the first quarter of 2019 included a $0.5 billion after-tax hedge valuation loss. Excluding these amounts, our core earnings have been more stable over recent quarters but continue to be heavily influenced by commodity prices.

Despite our portfolio enhancements, aggressive cost reductions and operational advancements, our financial results ~~with our three-fold strategy~~continue to be challenged by commodity prices and deterioration of ~~operating~~the macro-economic environment resulting from the unprecedented COVID-19 pandemic. Our earnings declined from the fourth quarter of 2019 to the first quarter of 2020 due to a decrease in ~~North America’s best resource plays, delivering superior execution and maintaining a high degree of financial strength.~~overall commodity prices. Led by ~~our development~~a 19% decrease in the ~~STACK,~~WTI from the fourth quarter of 2019 to the first quarter of 2020, our unhedged combined realized price dropped 23%. Despite these price drops, we ~~continued~~were able to improve our 90-day initial production rates. With investments in proprietary data tools, predictive analytics and artificial intelligence, we are delivering industry-leading, initial-rate well productivity performance and improving the performance of our established wells. Even though our 2017maintain production volumes ~~have declined from 2016 due~~while simultaneously reducing production and administrative costs 4% compared to ~~reduced~~2019.

Like earnings, our operating cash flow is sensitive to volatile commodity prices. EBITDAX, which excludes financial amounts related to discontinued operations, has been more stable over the past five quarters as our production growth and cost reductions

Table of Contents

countered price declines experienced over the same time period. Regardless of cash flow fluctuations, we remain focused on managing our capital investment to generate free cash flow. As operating cash flow has declined, we ~~estimate~~have adjusted our ~~highest-margin U.S. oil production from retained assets will exit 2017 at levels approximately 20% higher than year-end 2016.~~capital development plans accordingly.

~~Compared to 2016, commodity prices increased significantly and were the primary driver for improvements in Devon’s operating margins, earnings and cash flow during the first nine months of 2017.~~ We exited the ~~third~~first quarter of ~~2017~~2020 with $4.7 billion of liquidity comprised of ~~$2.8~~$1.7 billion of cash, inclusive of $200 million of cash restricted for discontinued operations, and ~~$2.9~~$3.0 billion of available credit under our Senior Credit Facility. We have $4.3 billion of debt outstanding with no ~~significant debt~~ maturities until the end of 2025. We currently have approximately 90% of our expected oil production and approximately 45% of our expected gas production protected with hedges for the remainder of 2020. These contracts consist of collars and swaps based off the WTI oil benchmark and the Henry Hub natural gas index. Additionally, we have entered into regional basis swaps in an effort to protect price realizations across our portfolio.

Results of Operations

The following graphs, discussion and analysis are intended to provide an understanding of our results of operations and current financial condition. To facilitate the review, these numbers are being presented before consideration of earnings attributable to noncontrolling interests. Analysis of the change in net earnings from continuing operations is shown below and analysis of the change in net earnings from discontinued operations is shown on page 33.

Continuing Operations

Q1 2020 vs. Q4 2019

Our first quarter 2020 net loss from continuing operations was $1.7 billion. The graph below shows the change in net earnings (loss) from the fourth quarter of 2019 to the first quarter of 2020. The material changes are further discussed by category on the following pages. To facilitate the review, these numbers are being presented before consideration of earnings attributable to noncontrolling interests.

Production Volumes

	Q1 2020		% of Total			Q4 2019		Change
Oil (MBbls/d)
Delaware Basin		84		51	%		84		+0	%
Anadarko Basin		24		15	%		27		- 14	%
Powder River Basin		21		13	%		20		+7	%
Eagle Ford		26		16	%		23		+13	%
Other		8		5	%		9		- 6	%
Total		163		100	%		163		+0	%

	Q1 2020		% of Total			Q4 2019		Change
Gas (MMcf/d)
Delaware Basin		244		38	%		234		+4	%
Anadarko Basin		272		43	%		295		- 8	%
Powder River Basin		29		4	%		28		+1	%
Eagle Ford		86		14	%		76		+12	%
Other		3		1	%		4		- 15	%
Total		634		100	%		637		- 1	%

	Q1 2020		% of Total			Q4 2019		Change
NGLs (MBbls/d)
Delaware Basin		37		47	%		32		+18	%
Anadarko Basin		30		37	%		30		- 2	%
Powder River Basin		3		4	%		2		+13	%
Eagle Ford		9		11	%		9		+3	%
Other		1		1	%		1		- 17	%
Total		80		100	%		74		+8	%

	Q1 2020		% of Total			Q4 2019		Change
Combined (MBoe/d)
Delaware Basin		162		47	%		154		+5	%
Anadarko Basin		98		28	%		107		- 8	%
Powder River Basin		29		8	%		27		+6	%
Eagle Ford		50		14	%		45		+11	%
Other		9		3	%		10		- 7	%
Total		348		100	%		343		+2	%

Table of Contents

Continued development in the Delaware Basin and Powder River Basin drove production increases. Additionally, a well-control event curtailed production volumes in the Eagle Ford during the fourth quarter of 2019. These were partially offset by lower activity in the Anadarko Basin.

In response to the current macro-economic environment, we have reduced planned 2020 capital expenditures by 45% and shut in certain marginal wells. As a result, we anticipate total production to decrease in the second quarter of 2020 to a range of 302 to 328 MBoe/d and continue to decrease for the second half of 2020.

Field Prices

	Q1 2020		Realization		Q4 2019		Change
Oil (per Bbl)
WTI index	$	46.44			$	57.02		- 19	%
Realized price, unhedged	$	44.59		96%	$	55.41		- 20	%
Cash settlements	$	5.14			$	1.48
Realized price, with hedges	$	49.73		107%	$	56.89		- 13	%

	Q1 2020		Realization		Q4 2019		Change
Gas (per Mcf)
Henry Hub index	$	1.95			$	2.50		- 22	%
Realized price, unhedged	$	1.21		62%	$	1.70		- 29	%
Cash settlements	$	0.36			$	0.13
Realized price, with hedges	$	1.57		81%	$	1.83		- 14	%

	Q1 2020		Realization		Q4 2019		Change
NGLs (per Bbl)
Mont Belvieu blended index ⁽¹⁾	$	14.39			$	18.69		- 23	%
Realized price, unhedged	$	10.40		72%	$	15.79		- 34	%
Cash settlements	$	0.61			$	1.75
Realized price, with hedges	$	11.01		77%	$	17.54		- 37	%

(1)Based upon composition of our NGL barrel.

	Q1 2020		Q4 2019		Change
Combined (per Boe)
Realized price, unhedged	$	25.43	$	32.82		- 23	%
Cash settlements	$	3.20	$	1.32
Realized price, with hedges	$	28.63	$	34.14		- 16	%

From the fourth quarter of 2019 to the first quarter of 2020, field prices contributed to a $227 million decrease in earnings. Unhedged realized oil, gas and NGL prices decreased primarily due to lower WTI, Henry Hub and Mont Belvieu index prices. These decreases were partially offset by favorable hedge cash settlements across each of our products.

As prices further deteriorated towards the end of the first quarter from the COVID-19 pandemic, we added additional oil and gas hedges for the remaining quarters of 2020 and the year 2021. ~~At September 30, 2017, we also had~~ We currently have approximately ~~65%~~90% of our remaining ~~2017 forecasted~~2020 oil production hedged atwith an average floor price of ~~$50/~~$42/Bbl and approximately ~~66%~~45% of our remaining ~~2017 forecasted natural~~2020 gas production hedged atwith an average floor price of ~~$3.10/MMBtu. We~~$2.15/Mcf. Additionally, we are currently building our ~~2018 and 2019~~2021 hedge positions at ~~similar~~market prices.

We expect to further enhance our financial strength with our announced $1 billion asset divestiture program. The planned divestitures include select portions of the Barnett Shale focused primarily in and around Johnson County and other properties located principally within Devon’s U.S. resource base. Through September 30, 2017, we have closed non-core divestitures totaling approximately $400 million under this program.

~~Table of Contents~~

We recently unveiled our “2020 Vision,” which is a strategic plan through the end of the decade intended to deliver top-tier returns on invested capital, while delivering sustainable, long-term growth for our business. We plan to attain leading returns with our 2020 Vision by pursing the following objectives:Hedge Settlements

~~Disciplined capital allocation that builds scale in the STACK and Delaware Basin.~~

~~Maximize returns by growing higher-value liquids production and lowering operating expenses with a technology focus across all areas of the business.~~

~~Further high-grade portfolio with monetization of several billion dollars of assets.~~

~~Reduce debt balances.~~

~~Return cash to shareholders.~~

	Q1 2020		Q4 2019		Change
	Q
Oil	$	76	$	22		+245	%
Natural gas		21		8		+163	%
NGL		4		12		- 67	%
Total cash settlements	$	101	$	42		+140	%

~~Table of Contents~~

~~Results of Operations~~

~~Oil, Gas and NGL Production~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

Change

2017

2016

Change

Oil (MBbls/d)

Barnett Shale

1

1

- 13
%

1

1

- 22
%
Delaware Basin

31

31

+0
%

31

35

- 12
%
Eagle Ford

30

33

- 10
%

38

44

- 15
%
Heavy Oil

18

22

- 15
%

18

23

- 22
%
Rockies Oil

12

11

+9
%

13

14

- 9
%
STACK

27

21

+31
%

24

18

+34
%
Other

11

11

+ 4
%

10

12

- 17
%
Retained assets

130

130

+0
%

135

147

- 8
%
Divested assets

—

6

N/M

—

13

N/M

Total

130

136

- 5
%

135

160

- 16
%
Bitumen (MBbls/d)

Heavy Oil

103

115

- 11
%

109

105

+4
%
Gas (MMcf/d)

Barnett Shale

672

730

- 8
%

677

752

- 10
%
Delaware Basin

90

92

- 3
%

91

92

- 0
%
Eagle Ford

88

85

+4
%

101

111

- 9
%
Heavy Oil

16

18

- 11
%

17

20

- 14
%
Rockies Oil

11

19

- 39
%

14

27

- 47
%
STACK

313

292

+7
%

300

296

+1
%
Other

11

13

- 16
%

12

14

- 16
%
Retained assets

1,201

1,249

- 4
%

1,212

1,312

- 8
%
Divested assets

—

75

N/M

—

165

N/M

Total

1,201

1,324

- 9
%

1,212

1,477

- 18
%
NGLs (MBbls/d)

Barnett Shale

36

44

- 18
%

40

45

- 10
%
Delaware Basin

11

12

- 14
%

10

12

- 19
%
Eagle Ford

12

13

- 8
%

13

18

- 29
%
Rockies Oil

1

1

+9
%

1

1

- 2
%
STACK

32

23

+37
%

30

28

+7
%
Other

2

3

- 10
%

2

3

- 13
%
Retained assets

94

96

- 2
%

96

107

- 10
%
Divested assets

—

8

N/M

—

17

N/M

Total

94

104

- 10
%

96

124

- 22
%
Combined (MBoe/d)

Barnett Shale

148

166

- 11
%

154

171

- 10
%
Delaware Basin

57

59

- 3
%

56

62

- 11
%
Eagle Ford

57

61

- 7
%

67

81

- 17
%
Heavy Oil

124

140

- 11
%

130

132

- 1
%
Rockies Oil

16

16

+0
%

17

20

- 17
%
STACK

111

92

+20
%

104

95

+9
%
Other

14

16

- 8
%

14

17

- 17
%
Retained assets

527

550

- 4
%

542

578

- 6
%
Divested assets

—

27

N/M

—

57

N/M

Total

527

577

- 9
%

542

635

- 15
%

~~Table of Contents~~

~~Oil, Gas and NGL Pricing~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017 ⁽¹⁾

2016 ⁽¹⁾

Change

2017 ⁽¹⁾

2016 ⁽¹⁾

Change

Oil (per Bbl)

U.S.

$
47.12

$
42.51

+11
%

$
47.84

$
36.89

+30
%

Canada

$
35.02

$
27.46

+28
%

$
32.77

$
22.26

+47
%

Total

$
45.41

$
40.12

+13
%

$
45.83

$
34.78

+32
%

Bitumen (per Bbl)

Canada

$
31.75

$
23.00

+38
%

$
28.49

$
17.77

+60
%

Gas (per Mcf)

U.S.

$
2.45

$
2.24

+10
%

$
2.54

$
1.70

+50
%

NGLs (per Bbl)

U.S.

$
15.15

$
9.80

+55
%

$
14.62

$
8.84

+65
%

Combined (per Boe)

U.S.

$
23.85

$
20.26

+18
%

$
24.44

$
17.16

+42
%

Canada

$
31.59

$
23.23

+36
%

$
28.50

$
18.15

+57
%

Total

$
25.67

$
20.98

+22
%

$
25.41

$
17.37

+46
%

~~(1)~~

~~Prices presented exclude any effects of oil, gas and NGL derivatives.~~

~~Commodity Sales~~

~~The volume and price changes in the tables above caused the following changes to our commodity sales between the three and nine months ended September 30, 2017 and 2016.~~

Three Months Ended September 30,

Oil

Bitumen

Gas

NGLs

Total

(Millions)

2016 sales

$
502

$
244

$
273

$
94

$
1,113

Change due to volumes

(23
)

(26
)

(25
)

(9
)

(83
)
Change due to prices

63

83

23

46

215

2017 sales

$
542

$
301

$
271

$
131

$
1,245

Nine Months Ended September 30,

Oil

Bitumen

Gas

NGLs

Total

(Millions)

2016 sales

$
1,523

$
512

$
688

$
300

$
3,023

Change due to volumes

(243
)

16

(125
)

(68
)

(420
)
Change due to prices

407

319

279

152

1,157

2017 sales

$
1,687

$
847

$
842

$
384

$
3,760

Commodity sales increased in the third quarter and the first nine months of 2017 due to price increases for all commodities. The increase in oil and bitumen sales resulted from a higher average WTI crude oil index price. Additionally, our bitumen sales benefited from tighter heavy oil differentials. The increases in gas and NGL sales were due to higher North American regional index prices upon which our gas sales are based and higher NGL prices at the Mont Belvieu, Texas hub.

The increases in sales due to the favorable movement in commodity prices was partially offset by a decline in production volumes. In 2016, we significantly reduced our drilling and completion capital programs in response to depressed commodity prices. Consequently, production from our retained U.S. assets, other than STACK, steadily declined throughout 2016 and into 2017. Our 2016 asset divestiture program also caused our volumes to decline significantly in the third and fourth quarters of 2016. Additionally, Hurricane Harvey negatively impacted our third quarter 2017 production in the Eagle Ford as we temporarily suspended operations.

~~Table of Contents~~

~~Oil, Gas and NGL Derivatives~~

A summary of our open commodity derivative positions is included in Note 3 to the financial statements included in “Part I. Financial Information – Item 1. Financial Statements” of this report. The following tables provide financial information associated with our oil, gas and NGL hedges. The first table presents the cash settlements and fair value gains and losses recognized as components of our revenues. The subsequent tables present our oil, gas and NGL prices with, and without, the effects of the cash settlements. The prices do not include the effects of fair value gains and losses.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(Millions)

Cash settlements:

Oil derivatives

$
11

$
20

$
29

$
(41
)
Gas derivatives

13

(4
)

14

47

NGL derivatives

—

—

—

(2
)
Total cash settlements

24

16

43

4

Gains (losses) on fair value changes:

Oil derivatives

(157
)

23

72

(7
)
Gas derivatives

(7
)

35

101

(26
)
NGL derivatives

(4
)

5

(2
)

(1
)
Total gains (losses) on fair value changes

(168
)

63

171

(34
)
Oil, gas and NGL derivatives

$
(144
)

$
79

$
214

$
(30
)

Three Months Ended September 30, 2017

Oil

Bitumen

Gas

NGLs

Boe

(Per Bbl)

(Per Bbl)

(Per Mcf)

(Per Bbl)

(Per Boe)

Realized price without hedges

$
45.41

$
31.75

$
2.45

$
15.15

$
25.67

Cash settlements of hedges

0.96

—

0.12

(0.03
)

0.52

Realized price, including cash settlements

$
46.37

$
31.75

$
2.57

$
15.12

$
26.19

��

Three Months Ended September 30, 2016

Oil

Bitumen

Gas

NGLs

Boe

(Per Bbl)

(Per Bbl)

(Per Mcf)

(Per Bbl)

(Per Boe)

Realized price without hedges

$
40.12

$
23.00

$
2.24

$
9.80

$
20.98

Cash settlements of hedges

1.56

—

(0.04
)

0.10

0.32

Realized price, including cash settlements

$
41.68

$
23.00

$
2.20

$
9.90

$
21.30

Nine Months Ended September 30, 2017

Oil

Bitumen

Gas

NGLs

Boe

(Per Bbl)

(Per Bbl)

(Per Mcf)

(Per Bbl)

(Per Boe)

Realized price without hedges

$
45.83

$
28.49

$
2.54

$
14.62

$
25.41

Cash settlements of hedges

0.80

—

0.05

(0.02
)

0.29

Realized price, including cash settlements

$
46.63

$
28.49

$
2.59

$
14.60

$
25.70

Nine Months Ended September 30, 2016

Oil

Bitumen

Gas

NGLs

Boe

(Per Bbl)

(Per Bbl)

(Per Mcf)

(Per Bbl)

(Per Boe)

Realized price without hedges

$
34.78

$
17.77

$
1.70

$
8.84

$
17.37

Cash settlements of hedges

(0.94
)

—

0.12

(0.06
)

0.02

Realized price, including cash settlements

$
33.84

$
17.77

$
1.82

$
8.78

$
17.39

~~Table of Contents~~

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

Production Expenses

	Q1 2020			Q4 2019			Change
LOE	$	126		$	120			+5	%
Gathering, processing & transportation		130			131			- 1	%
Production taxes		56			69			- 19	%
Property taxes		6			4			+50	%
Total	$	318		$	324			- 2	%
Per Boe:
LOE	$	3.96		$	3.79			+5	%
Gathering, processing & transportation	$	4.11		$	4.16			- 1	%
Percent of oil, gas and NGL sales:
Production taxes		6.9	%		6.7	%		+3	%

In response to the current macro-economic environment, reduced planned 2020 capital expenditures and shutting in certain marginal wells, we anticipate decreases in LOE and gathering, processing and transportation of approximately 10% during the remainder of 2020. Additionally, we expect lower production taxes as a result of lower oil, gas and NGL revenues.

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 revenues less production expenses and is not prepared in accordance with GAAP. A reconciliation to the comparable GAAP measures is found in “Non-GAAP Measures” in this Item 2. The changes in production volumes, field prices and production expenses, shown above, had the following impact on our field-level cash margins by asset.

	Q1 2020		$ per BOE		Q4 2019		$ per BOE
Field-level cash margin (non-GAAP)
Delaware Basin	$	260	$	17.72	$	372	$	26.30
Anadarko Basin		74	$	8.22		147	$	15.06
Powder River Basin		54	$	20.48		73	$	28.86
Eagle Ford		87	$	19.20		98	$	23.72
Other		14	$	15.55		21	$	22.33
Total	$	489	$	15.41	$	711	$	22.55

Table of Contents

DD&A and Asset Impairments

	Q1 2020		Q4 2019		Change
Oil and gas per Boe	$	11.90	$	11.71		+2	%

Oil and gas	$	377	$	370		+2	%
Other property and equipment		24		12		+93	%
Total	$	401	$	382		+5	%

Asset impairments	$	2,666	$	—	N/M

Asset impairments were $2.7 billion in the first quarter of 2020 due to significant decreases in commodity ~~derivatives. In addition to cash settlements, we also~~prices since the end of 2019 resulting primarily from the COVID-19 pandemic. For additional information, see Note 5 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

As a result of the asset impairments of $2.7 billion during the first quarter of 2020 and the lower production resulting from decreased capital expenditures, DD&A will decrease approximately 25% for the remainder of 2020.

General and Administrative Expenses

	Q1 2020		Q4 2019		Change
Labor and benefits (net of reimbursements)	$	66	$	80		- 18	%
Non-labor		36		39		- 8	%
Total Devon	$	102	$	119		- 14	%

G&A decreased primarily as a result of lower employee costs and benefits.

Other Items

	Q1 2020			Q4 2019			Change in earnings
Commodity hedge valuation changes ⁽¹⁾	$	619		$	(158	)	$	777
Marketing and midstream operations		(18	)		5			(23	)
Exploration expenses		112			29			(83	)
Net financing costs		65			64			(1	)
Restructuring and transaction costs		—			11			11
Other expenses		(48	)		16			64
							$	745

(1)

Included as a component of upstream revenues 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 ~~relationships~~relationship between contract prices and the associated forward curves. Including the cash settlements discussed above, our oil, gas and NGL derivatives incurred a net loss in the third quarter of 2017 and generated a net gain in the third quarter of 2016. Including the cash settlements discussed above, our oil, gas and NGL derivatives generated a net gain during the first nine months of 2017 and incurred a net loss during the first nine months of 2016.

~~Marketing and Midstream Revenues and Operating Expenses~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

Change

2017

2016

Change

(Millions)

Operating revenues

$
2,055

$
1,690

+22
%

$
5,992

$
4,503

+33
%
Product purchases

(1,721
)

(1,391
)

+24
%

(5,043
)

(3,618
)

+39
%
Operations and maintenance expenses

(92
)

(89
)

+3
%

(276
)

(266
)

+4
%
Operating profit

$
242

$
210

+15
%

$
673

$
619

+9
%

Devon loss

$
(11
)

$
(18
)

+39
%

$
(47
)

$
(37
)

-27
%
EnLink profit

253

228

+11
%

720

656

+10
%
Total profit

$
242

$
210

+15
%

$
673

$
619

+9
%

The overall increase in marketing and midstream operating margin during the third quarter and the first nine months of 2017 was primarily due to an increase in EnLink’s throughput volumes related to gas processing and transmission activities, offset by a decline in margins on Devon’s downstream marketing commitments. Devon is actively engaged in optimization activities to improve margins to help offset the costs of downstream commitments; however, we expect those commitments to negatively impact our margins throughout 2017.

~~Asset Dispositions and Other~~

~~In conjunction with the non-core upstream asset divestitures, we recognized a gain during the third quarter of 2016.~~ For ~~further discussion,~~additional information, see Note 23 in “Part I. Financial Information – Item 1. Financial Statements” ofin this report.

~~Lease Operating Expenses~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

Change

2017

2016

Change

(Millions, except per Boe amounts)

LOE:

U.S.

$
256

$
248

+3
%

$
761

$
886

- 14
%
Canada

135

107

+26
%

415

329

+26
%
Total

$
391

$
355

+10
%

$
1,176

$
1,215

- 3
%
LOE per Boe:

U.S.

$
6.89

$
6.17

+12
%

$
6.76

$
6.42

+5
%
Canada

$
11.81

$
8.31

+42
%

$
11.70

$
9.13

+28
%
Total

$
8.05

$
6.69

+20
%

$
7.95

$
6.98

+14
%

~~Total LOE and LOE per Boe increased during~~Marketing operations decreased approximately $23 million primarily from downstream product inventory impairments of $17 million recognized in the ~~third~~first quarter of 2017 primarily due to higher transportation of $38 million resulting from tolls on Canada’s Access Pipeline of $27 million, which commenced in the fourth quarter of 2016 subsequent to the sale of our interest in the pipeline, and continued development of the STACK.

Total LOE decreased during the first nine months of 2017 primarily due to our non-core U.S. property divestitures during 2016 and continued well optimization and cost reduction initiatives across our portfolio which have offset industry inflation. These initiatives have been primarily focused on reducing costs associated with water disposal, power and fuel, compression and workovers. These cost savings and non-core divestitures impact were partially offset by Access Pipeline transportation tolls of $87 million during the first nine months of 2017, which was the primary driver of the increase in total LOE per Boe.

~~Table of Contents~~

~~General and Administrative Expenses~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

Change

2017

2016

Change

(Millions)

Gross G&A

$
196

$
184

+7
%

$
623

$
642

- 3
%
Capitalized G&A

(55
)

(54
)

+3
%

(170
)

(183
)

- 7
%
Reimbursed G&A

(19
)

(19
)

+1
%

(53
)

(66
)

- 20
%
Devon Net G&A

122

111

+10
%

400

393

+2
%
EnLink Net G&A

31

30

+2
%

98

89

+10
%
Net G&A

$
153

$
141

+8
%

$
498

$
482

+3
%

Gross G&A increased during the third quarter of 2017 due to an increase in costs related to automation and process improvement initiatives and decreased the first nine months of 2017 largely due to lower Devon employee costs resulting from our 2016 workforce reduction and other cost reduction initiatives. During the first nine months of 2017, reimbursed G&A decreased primarily due to the divestitures of operated properties in 2016. EnLink net G&A increased during the third quarter and for the first nine months of 2017 primarily due to higher employee compensation costs.

~~Production and Property Taxes~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

Change

2017

2016

Change

(Millions)

Production taxes

$
40

$
39

+3
%

$
131

$
110

+19
%
Property and other taxes

20

19

+2
%

62

79

- 21
%
Devon production and property taxes

60

58

+4
%

193

189

+2
%
EnLink property taxes

11

9

+24
%

34

31

+7
%
Production and property taxes

$
71

$
67

+5
%

$
227

$
220

+3
%
Percentage of oil, gas and NGL sales:

Production taxes

3.2
%

3.5
%

- 8
%

3.5
%

3.6
%

- 4
%
Property and other taxes

2.5
%

2.6
%

- 3
%

2.6
%

3.7
%

- 30
%
Total

5.7
%

6.1
%

- 6
%

6.1
%

7.3
%

- 17
%

~~Production taxes increased during each period in 2017 on an absolute dollar basis primarily due to an increase in our U.S. revenues, on which the majority of our production taxes are assessed.~~2020.

During the first nine months of 2017, property and other taxes decreased primarily as a result of lower property value assessments from the local taxing authorities across our key operating areas and as a result of our non-core oil and gas property divestitures during 2016. Property taxes do not always changeExploration expenses increased in ~~direct correlation with the change in oil, gas and NGL sales and are generally determined based on the valuation of the underlying assets.~~

~~Depreciation, Depletion and Amortization~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

Change

2017

2016

Change

(Millions, except per Boe amounts)

DD&A:

Oil and gas properties

$
232

$
239

- 3
%

$
675

$
930

- 27
%
Other assets

26

29

- 9
%

80

117

- 31
%
Devon DD&A

258

268

- 4
%

755

1,047

- 28
%
EnLink DD&A

142

126

+13
%

407

373

+9
%
Total DD&A

$
400

$
394

+2
%

$
1,162

$
1,420

- 18
%
DD&A per Boe:

Oil and gas properties

$
4.78

$
4.51

+6
%

$
4.56

$
5.35

- 15
%

~~Table of Contents~~

~~DD&A from our oil and gas properties decreased in the third quarter primarily~~2020 due to ~~lower production and decreased during the first nine months of 2017 largely due to lower DD&A rates, resulting from the oil and gas~~$110 million in unproved asset ~~impairments and non-core U.S. divestures in 2016. DD&A from our other assets decreased due to the divestiture of Access Pipeline in the fourth quarter of 2016.~~

~~EnLink’s DD&A increased primarily due to acquisitions made during 2016 and gathering system expansions in 2017.~~

~~Asset Impairments~~

~~During the third quarter and the first nine months of 2016, we recognized asset impairments totaling $319 million and $4.9 billion, respectively.~~impairments. For ~~further discussion,~~additional information, see Note 5 in “Part I. Financial Information – Item 1. Financial Statements” ofin this report.

~~Restructuring and Transaction Costs~~

~~During the first nine months of 2016, we recognized restructuring costs of $249 million as~~Other expenses decreased due to a ~~result of a reduction~~severance tax refund received in ~~workforce driven by our cost reduction initiatives and divestiture of non-core properties.~~2020 related to prior periods.

~~During the first nine months of 2016, we recognized transaction costs of $17 million, primarily associated with the closing of the acquisitions discussed in~~

Income Taxes

	Q1 2020			Q4 2019
Current benefit	$	(106	)	$	(5	)
Deferred benefit		(311	)		(28	)
Total benefit	$	(417	)	$	(33	)
Effective income tax rate		20	%		155	%

For discussion on income taxes, see Note 27 in “Part I. Financial Information – Item 1. Financial Statements” ofin this report.

Table of Contents

~~Net Financing Costs~~Q1 2020 vs. Q1 2019

Our first quarter 2020 net loss from continuing operations was $1.7 billion. The graph below shows the change in net loss from the first quarter of 2019 to the first quarter of 2020. The material changes are further discussed on the following pages. To facilitate the review, these numbers are being presented before consideration of earnings attributable to noncontrolling interests.

Table of Contents

Production Volumes

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

Change

2017

2016

Change

(Millions)

Devon net financing costs:

Interest based on debt outstanding

$
97

$
120

- 19
%

$
292

$
376

- 22
%
Early retirement of debt

—

84

N/M

—

84

N/M

Capitalized interest

(19
)

(16
)

+21
%

(53
)

(47
)

+12
%
Other

(1
)

7

- 114
%

(3
)

18

- 117
%
Total Devon net financing costs

77

195

- 60
%

236

431

- 45
%
EnLink net financing costs:

Interest based on debt outstanding

43

37

+16
%

125

105

+19
%
Interest accretion on deferred installment payment

7

13

- 46
%

20

39

- 49
%
Early retirement of debt

—

—

N/M

(9
)

—

N/M

Other

—

(2
)

N/M

(2
)

(5
)

- 60
%
Total EnLink net financing costs

50

48

+2
%

134

139

- 3
%
Total net financing costs

$
127

$
243

- 48
%

$
370

$
570

- 35
%

	Q1 2020		% of Total			Q1 2019		Change
Oil (MBbls/d)
Delaware Basin		84		51	%		60		+40	%
Anadarko Basin		24		15	%		32		- 27	%
Powder River Basin		21		13	%		15		+39	%
Eagle Ford		26		16	%		25		+6	%
Other		8		5	%		9		- 13	%
Total		163		100	%		141		+15	%

~~Devon’s net financing costs decreased during the third quarter and~~

	Q1 2020		% of Total			Q1 2019		Change
Gas (MMcf/d)
Delaware Basin		244		38	%		146		+68	%
Anadarko Basin		272		43	%		333		- 18	%
Powder River Basin		29		4	%		18		+56	%
Eagle Ford		86		14	%		83		+3	%
Other		3		1	%		8		- 58	%
Total		634		100	%		588		+8	%

	Q1 2020		% of Total			Q1 2019		Change
NGLs (MBbls/d)
Delaware Basin		37		47	%		23		+62	%
Anadarko Basin		30		37	%		35		- 17	%
Powder River Basin		3		4	%		2		+44	%
Eagle Ford		9		11	%		12		- 21	%
Other		1		1	%		2		- 32	%
Total		80		100	%		74		+9	%

	Q1 2020		% of Total			Q1 2019		Change
Combined (MBoe/d)
Delaware Basin		162		47	%		107		+51	%
Anadarko Basin		98		28	%		123		- 20	%
Powder River Basin		29		8	%		21		+41	%
Eagle Ford		50		14	%		50		- 1	%
Other		9		3	%		12		- 22	%
Total		348		100	%		313		+11	%

An increase in production volumes from the first ~~nine months~~quarter of ~~2017~~2019 to the first quarter of 2020 contributed to a $133 million increase in earnings. Continued development in the Delaware Basin and Powder River Basin drove production increases, which were slightly offset by decreased activity in the Anadarko Basin.

Field Prices

	Q1 2020		Realization		Q1 2019		Change
Oil (per Bbl)
WTI index	$	46.44			$	54.88		- 15	%
Realized price, unhedged	$	44.59		96%	$	51.83		- 14	%
Cash settlements	$	5.14			$	3.65
Realized price, with hedges	$	49.73		107%	$	55.48		- 10	%

	Q1 2020		Realization		Q1 2019			Change
Gas (per Mcf)
Henry Hub index	$	1.95			$	3.15			- 38	%
Realized price, unhedged	$	1.21		62%	$	2.62			- 54	%
Cash settlements	$	0.36			$	(0.31	)
Realized price, with hedges	$	1.57		81%	$	2.31			- 32	%

	Q1 2020		Realization		Q1 2019		Change
NGLs (per Bbl)
Mont Belvieu blended index ⁽¹⁾	$	14.39			$	22.94		- 37	%
Realized price, unhedged	$	10.40		72%	$	18.36		- 43	%
Cash settlements	$	0.61			$	0.67
Realized price, with hedges	$	11.01		77%	$	19.03		- 42	%

(1)

Based upon composition of our NGL barrel.

	Q1 2020		Q1 2019		Change
Combined (per Boe)
Realized price, unhedged	$	25.43	$	32.65		- 22	%
Cash settlements	$	3.20	$	1.22
Realized price, with hedges	$	28.63	$	33.87		- 15	%

From the first quarter of 2019 to the first quarter of 2020, field prices contributed to a $245 million decrease in earnings. Unhedged realized oil, gas and NGL prices decreased primarily due to lower WTI, Henry Hub and Mont Belvieu index prices. These decreases were partially offset by favorable hedge cash settlements across each of our products.

Hedge Settlements

	Q1 2020		Q1 2019			Change
	Q
Oil	$	76	$	46			+65	%
Natural gas		21		(16	)		+231	%
NGL		4		4			+0	%
Total cash settlements	$	101	$	34			+197	%

Cash settlements as presented in the ~~2016 repayment of $2.5 billion~~tables above represent realized gains or losses related to the instruments described in ~~borrowings, including scheduled maturities and early retirements funded with asset divestiture proceeds.~~

EnLink’s interest on debt outstanding increased during the third quarter and the first nine months of 2017 due to increased borrowings. In the first nine months of 2017, EnLink recognized a gain on extinguishment of debt as disclosed in Note 143 in “Part I. Financial Information – Item 1. Financial Statements” ofin this report.

~~Income Taxes~~

Production Expenses

	Q1 2020			Q1 2019			Change
LOE	$	126		$	110			+15	%
Gathering, processing & transportation		130			109			+19	%
Production taxes		56			60			- 7	%
Property taxes		6			4			+50	%
Total	$	318		$	283			+12	%
Per Boe:
LOE	$	3.96		$	3.95			+0	%
Gathering, processing & transportation	$	4.11		$	3.86			+6	%
Percent of oil, gas and NGL sales:
Production taxes		6.9	%		6.5	%		+6	%

Table of Contents

LOE and gathering, processing and transportation increased primarily due to continued development and increased activity in the Delaware Basin.

Field-Level Cash Margin

	Q1 2020		$ per BOE		Q1 2019		$ per BOE
Field-level cash margin (non-GAAP)
Delaware Basin	$	260	$	17.72	$	235	$	24.39
Anadarko Basin		74	$	8.22		203	$	18.27
Powder River Basin		54	$	20.48		50	$	27.02
Eagle Ford		87	$	19.20		128	$	28.53
Other		14	$	15.55		19	$	17.57
Total	$	489	$	15.41	$	635	$	22.54

~~Table of Contents~~DD&A and Asset Impairments

~~We continue~~

	Q1 2020		Q1 2019		Change
Oil and gas per Boe	$	11.90	$	11.73		+1	%

Oil and gas	$	377	$	331		+14	%
Other property and equipment		24		29		- 19	%
Total	$	401	$	360		+11	%

Asset impairments	$	2,666	$	—	N/M

Our oil and gas DD&A increased primarily due to ~~expect low current income tax rates~~continued development in the ~~U.S. segment based on our continuing net operating loss position.~~Delaware Basin and Powder River Basin properties.

Asset impairments were $2.7 billion in the first quarter of 2020 due to significant decreases in commodity prices since the end of 2019 resulting primarily from the COVID-19 pandemic. For ~~further discussion on income taxes,~~additional information, see Note 75 in “Part I. Financial Information – Item 1. Financial Statements” ofin this report.

General and Administrative Expenses

	Q1 2020		Q1 2019		Change
Labor and benefits (net of reimbursements)	$	66	$	86		- 23	%
Non-labor		36		49		- 27	%
Total Devon	$	102	$	135		- 24	%

Labor and benefits and non-labor expenses decreased primarily as a result of continued workforce reduction and cost savings initiatives.

Other Items

	Q1 2020			Q1 2019			Change in earnings
Commodity hedge valuation changes ⁽¹⁾	$	619		$	(639	)	$	1,258
Marketing and midstream operations		(18	)		15			(33	)
Exploration expenses		112			4			(108	)
Asset dispositions		—			(45	)		(45	)
Net financing costs		65			60			(5	)
Restructuring and transaction costs		—			51			51
Other expenses		(48	)		(22	)		26
							$	1,144

(1)

Included as a component of upstream revenues on the consolidated statements of comprehensive earnings.

Marketing operations decreased approximately $33 million primarily from downstream product inventory impairments of $17 million recognized in the first quarter of 2020.

Exploration expenses increased in 2020 due to $110 million in unproved asset impairments. For additional information, see Note 5 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Income Taxes

	Q1 2020			Q1 2019
Current benefit	$	(106	)	$	(4	)
Deferred benefit		(311	)		(115	)
Total benefit	$	(417	)	$	(119	)
Effective income tax rate		20	%		24	%

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

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Discontinued Operations

Results of Operations – Discontinued Operations

The table below presents key components from discontinued operations for the time periods presented. Discontinued operations include the Canadian business that Devon sold in June 2019 and the Barnett Shale assets that Devon has contracted to sell and which is expected to close on December 31, 2020. For additional information on discontinued operations, see Note 17 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

	Q1 2020			Q4 2019			Q1 2019
Upstream revenues	$	92		$	121		$	396
Production expenses	$	74		$	75		$	222
Marketing margin	$	—		$	—		$	17
Asset impairments	$	179		$	748		$	—
Restructuring and transaction costs	$	—		$	4		$	3
Earnings (loss) from discontinued operations before income taxes	$	(157	)	$	(724	)	$	70
Income tax expense (benefit)	$	(32	)	$	(72	)	$	9
Net earnings (loss) from discontinued operations, net of tax	$	(125	)	$	(652	)	$	61

Production (MMBoe):
Barnett Shale		9			9			9
Canada		—			—			10
Total production		9			9			19
Realized price, unhedged (per Boe) - Barnett Shale	$	10.16		$	13.45		$	16.18
Realized price, unhedged (per Boe) - Canada	N/A			N/A			$	34.42

Q1 2020 vs. Q4 2019

Net loss from discontinued operations, net of tax decreased $527 million due to a decrease in asset impairments from the fourth quarter of 2019 to the first quarter of 2020. During the first quarter of 2020, we recognized $179 million in asset impairments on our Barnett Shale assets due to the amended terms of the Barnett sales agreement. During the fourth quarter of 2019, we recognized a $748 million asset impairment to our Barnett Shale assets.

Q1 2020 vs. Q1 2019

Net earnings (loss) from discontinued operations, net of tax decreased $186 million due to $179 million in incremental asset impairments to our Barnett Shale assets related to the amended terms of the Barnett sales agreement during the first quarter of 2020. Upstream revenues and production expenses decreased from the first quarter of 2019 to the first quarter of 2020 due to Devon’s divestment of its Canadian business in the second quarter of 2019.

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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 ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~2019.

Devon

EnLink

Consolidated

2017

2016

2017

2016

2017

2016

(Millions)

Operating cash flow

$
1,892

$
724

$
528

$
513

$
2,420

$
1,237

Divestitures of property and equipment

321

1,884

2

5

323

1,889

Issuance of common stock

—

1,469

—

—

—

1,469

Proceeds from sale of investment

—

—

190

—

190

—

Capital expenditures

(1,541
)

(1,235
)

(662
)

(424
)

(2,203
)

(1,659
)
Acquisitions of property, equipment and businesses

(39
)

(849
)

—

(792
)

(39
)

(1,641
)
Debt activity, net

—

(1,946
)

252

178

252

(1,768
)
Payment of installment payable

—

—

(250
)

—

(250
)

—

Shareholder and noncontrolling interests distributions

(95
)

(190
)

(247
)

(224
)

(342
)

(414
)
EnLink and General Partner distributions

199

199

(199
)

(199
)

—

—

Issuance of subsidiary units

—

—

486

835

486

835

Effect of exchange rate and other

(45
)

(23
)

30

150

(15
)

127

Net change in cash and cash equivalents

$
692

$
33

$
130

$
42

$
822

$
75

Cash and cash equivalents at end of period

$
2,639

$
2,325

$
142

$
60

$
2,781

$
2,385

	Three Months Ended March 31st,
	2020			2019
Operating cash flow from continuing operations	$	529		$	437
Divestitures of property and equipment		25			310
Capital expenditures		(425	)		(490	)
Acquisitions of property and equipment		(4	)		(10	)
Debt activity, net		—			(162	)
Repurchases of common stock		(38	)		(999	)
Common stock dividends		(34	)		(34	)
Contributions from noncontrolling interests		5			—
Distributions to noncontrolling interests		(3	)		—
Other		(17	)		(19	)
Net change in cash, cash equivalents and restricted cash from discontinued operations		(155	)		(124	)
Net change in cash, cash equivalents and restricted cash	$	(117	)	$	(1,091	)
Cash, cash equivalents and restricted cash at end of period	$	1,727		$	1,355

Operating Cash Flow

~~Net~~

As presented in the table above, net cash provided by operating activities ~~increased 96% primarily due~~continued to ~~significantly higher commodity prices as compared to~~be a significant source of capital and liquidity. During the ~~first nine~~three months ~~of 2016.~~

~~Our consolidated~~ended March 31, 2020, our operating cash flow funded ~~100% of~~all our capital expenditures ~~during the first nine months of 2017. In 2016, leveraging our liquidity, we also used~~and dividends, allowing us to use available cash balances ~~and proceeds from our common stock offering and non-core asset divestitures~~ to fund ~~our acquisitions and~~other capital ~~expenditures.~~uses.

~~Divestitures of Property and Equipment~~Operating Cash Flow

During the first nine months of 2017, as part of our announced divestiture program, we sold non-core U.S. assets for approximately $320 million, net of customary purchase price adjustments. During the first nine months of 2016, we divested certain non-core upstream assets in the U.S. for approximately $1.9 billion. For further discussion, see Note 2 in “Part 1. Financial Information – Item 1. Financial Statements” in this report.

~~Issuance of Common Stock~~

In February 2016, we issued 79 million shares of our common stock to the public, inclusive of 10 million shares sold as part of the underwriters’ option. Net proceeds from the offering were approximately $1.5 billion.

~~Proceeds from Sale of Investment~~

During the first quarter of 2017, EnLink divested its ownership interest in Howard Energy Partners for approximately $190 million. Proceeds were primarily used to pay a portion of the $250 million installment payment related to EnLink’s 2016 acquisition further discussed in Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

~~Table of Contents~~

~~Capital Expenditures and Acquisitions of Property, Equipment and Businesses~~

~~The amounts~~As presented in the table ~~below reflect~~above, net cash ~~payments for capital expenditures, including cash paid for capital expenditures incurred in prior periods.~~

Nine Months Ended September 30,

2017

2016

(Millions)

Oil and gas

$
1,480

$
1,212

Corporate and other

61

23

Devon capital expenditures

1,541

1,235

EnLink capital expenditures

662

424

Total capital expenditures

$
2,203

$
1,659

Devon acquisitions

39

849

EnLink acquisitions

—

792

Total acquisitions

$
39

$
1,641

~~Capital expenditures consist of amounts related~~provided by operating activities continued to our oil and gas exploration and development operations, midstream operations, other corporate activities and EnLink growth and maintenance activities. The vast majority of Devon’s capital expenditures are for the acquisition, drilling and development of oil and gas properties. Devon’s 2017 objectives are to concentrate capital spend in the STACK and Delaware Basin, while investing within cash flow and maintainingbe a significant ~~flexibility. Our capital investment program is driven by a disciplined allocation process focused on returns.~~

Capital expenditures for midstream operations are primarily for the construction and expansion of oil and gas gathering facilities and pipelines. Midstream capital expenditures are largely impacted by oil and gas development activities.

Acquisition capital for the first nine months of 2016 primarily consisted of Devon’s acquisition of assets in the STACK play for approximately $1.5 billion and EnLink’s acquisition of Anadarko Basin gathering and processing midstream assets for $1.4 billion. Approximately $850 million and $800 million, respectively, was paid in cash at the closings with the remainder funded with equity consideration and debt. For additional information, see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

~~Debt Activity, Net~~

During the first nine months of 2017, consolidated net debt borrowings increased $252 million. In May 2017, EnLink issued $500 million of 5.45% senior notes due in 2047 to repay outstanding borrowings under its revolving credit facility and for general partnership purposes. In June 2017, EnLink redeemed its 7.125% senior unsecured notes due in 2022 for aggregate cash consideration of $174 million. Additionally, EnLink reduced its credit facility borrowings $74 million during the first nine months of 2017.

During the first nine months of 2016, our consolidated net debt borrowings decreased $1.8 billion. The decrease was primarily due to completed tender offers to purchase and redeem $1.2 billion of debt securities. For additional information, see Note 14 in “Part I. Financial Information – Item 1. Financial Statements” in this report. The remaining decrease was due to reducing our commercial paper balances by $626 million during the first nine months of 2016.

~~Payment of Installment Payable~~

During the first quarter of 2017, EnLink made the first installment payment related to its 2016 acquisition further discussed in Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

~~Table of Contents~~

~~Shareholder and Noncontrolling Interests Distributions~~

The following table summarizes our common stock dividends during the first nine months of 2017 and 2016. In the second quarter of 2016, we decreased our quarterly cash dividend rate to $0.06 per share.

~~EnLink and the General Partner distributed $247 million and $224 million to non-Devon unitholders during the first nine months of 2017 and 2016, respectively.~~

~~EnLink and General Partner Distributions~~

~~Devon received $199 million in distributions from EnLink and the General Partner during the first nine months of 2017 and 2016.~~

~~Issuance of Subsidiary Units~~

During the first nine months of 2017, EnLink issued and sold 5 million common units through its “at the market” programs and generated $92 million in net proceeds. In September 2017, EnLink issued preferred units in an underwritten public offering generating net proceeds of approximately $394 million.

In January 2016, as part of its acquisition of Anadarko Basin gathering and processing midstream assets, EnLink issued 50 million preferred units in a private placement generating cash proceeds of approximately $725 million. General Partner common units were also issued as consideration in the transaction. Additionally, during the first nine months of 2016, EnLink issued and sold 7 million common units for net proceeds of $110 million through its “at the market” programs.

~~Liquidity~~

~~Our primary sources~~source of capital and ~~liquidity are~~liquidity. During the three months ended March 31, 2020, our operating cash flow ~~asset divestiture proceeds~~funded all our capital expenditures and dividends, allowing us to use available cash on hand. 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. Available sources of capital and liquidity also include, among other things, debt and equity securities that can be issued pursuant to our shelf registration statement filed with the SEC, as well as the sale of a portion of our common units representing interests in our investment in EnLink and the General Partner. We estimate the combination of these sources of capital will continue to be adequatebalances to fund ~~our planned~~other capital ~~expenditures, future debt repayments and other contractual commitments as discussed in this section.~~uses.

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. During the three months ended March 31, 2020, our operating cash flow funded all our capital expenditures and dividends, allowing us to use available cash balances to fund other capital uses.

Divestitures of Property and Equipment

During the first three months of 2019, we sold non-core U.S. assets for approximately $300 million, net of customary purchase price adjustments. For additional information, please see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Capital Expenditures and Acquisitions of Property and Equipment

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 31st,
	2020		2019
Delaware Basin	$	221	$	225
Powder River Basin		85		56
Eagle Ford		94		55
Anadarko Basin		8		136
Other		3		11
Total oil and gas		411		483
Midstream		8		—
Other		6		7
Total capital expenditures	$	425	$	490
Acquisitions	$	4	$	10

Capital expenditures consist primarily of amounts related to our oil and gas exploration and development operations, midstream operations and other corporate activities. Our capital program is designed to operate within or near operating cash flow. This is evidenced by our operating cash flow fully funding capital expenditures for the three months ended March 31, 2020 and 89% of

Table of Contents

capital expenditures for the three months ended March 31, 2019. Our capital investment program is driven by a disciplined allocation process focused on returns. Our capital expenditures are lower in 2020 primarily due to our decreased spending in the Anadarko Basin, partially offset by increased capital investment in the Powder River Basin and Eagle Ford. In response to the current macro-economic environment, we reduced our 2020 capital expenditures outlook by approximately $800 million, or 45% compared to the original capital budget, and expect to fund our 2020 capital program within operating cash flows even at current depressed commodity prices.

Debt Activity

During the first quarter of 2019, our debt decreased $162 million due to the repayment of our 6.30% senior notes at maturity.

Shareholder Distributions and Stock Activity

We paid common stock dividends of $34 million ($0.09 per share) and $34 million ($0.08 per share) during the first three months of 2020 and 2019, respectively. In February 2020, we announced a 22% increase to our quarterly dividend, to $0.11 per share, beginning in the second quarter of 2020. Beginning with the second quarter of 2019, we increased our quarterly dividend to $0.09 per share.

We repurchased 2.2 million shares of common stock for $38 million in the first three months of 2020 and 36.1 million shares of common stock for $1.0 billion in the first three months of 2019 under share repurchase programs authorized by our Board of Directors. For additional information, see Note 16in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Noncontrolling Interest Contributions and Distributions

During the first quarter of 2020, we received $5 million in contributions from our noncontrolling interests in CDM and distributed $3 million to our noncontrolling interests in CDM.

Cash Flows from Discontinued Operations

All cash flows in the following table relate to activities of our Canadian business that Devon sold in June 2019 and the Barnett Shale assets that Devon has contracted to sell and is expected to close in the fourth quarter of 2020.

	Three Months Ended March 31st,
	2020			2019
Canadian tax payments	$	(153	)	$	—
Other		22			(59	)
Operating activities		(131	)		(59	)
Investing activities		(1	)		(59	)
Financing activities		—			(7	)
Effect of exchange rate changes on cash		(23	)		1
Net change in cash, cash equivalents and restricted cash of discontinued operations	$	(155	)	$	(124	)

Operating cash flows in the first quarter of 2020 include $153 million of cash income tax payments in Canada related to divestitures. Additionally, operating cash flow was negatively affected in the first quarter of 2019 primarily due to realization impacts associated with the widening Canadian differentials in the fourth quarter of 2018. See Note 2and Note 17 in “Part I. Financial Information – Item 1. Financial Statements” in this report for additional details on these divestitures.

Liquidity

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

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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.

Beginning in the first quarter of 2020, the macro-economic environment has deteriorated significantly and has created extreme volatility primarily due to concerns arising from the COVID-19 pandemic. In response to this environment, we will continue to maintain flexibility within our capital program as we continue to focus on protecting our financial strength and maintaining operational continuity.

Operating Cash Flow

Key inputs into determining our planned capital investment are the amounts 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 2020, we held approximately $1.7 billion of cash, inclusive of $200 million of cash restricted for discontinued operations. Our operating cash flow isforecasts are sensitive to many variables and include a measure of uncertainty as the actual results of these variables may differ from our expectations.

Commodity Prices – The most uncertain and volatile ~~of which~~variables for our operating cash flow are the prices of the oil, ~~bitumen,~~ gas and NGLs we produce and sell. ~~Our consolidated operating cash flow increased approximately $1.2 billion~~Prices are determined primarily by prevailing market conditions. Regional and worldwide economic activity, weather and other substantially variable factors influence market conditions for these products. These factors, which are difficult to predict, create volatility in prices and are beyond our control.

Actions taken by governments around the ~~first nine months of 2017 compared~~world in response to the ~~first nine months of 2016 largely due~~COVID-19 pandemic have led to ~~increases~~an unprecedented decline in ~~commodity prices. We expect operating cash flow~~global oil demand. Oil prices, which had already been trending down on concerns about oversupply, subsequently collapsed in March. Benchmark WTI spot oil prices fell from over $60/Bbl in early January to continue to be a key source of liquidity as we adjust our capital program to invest within our operating cash flow. Furthermore, proceeds from non-core asset divestitures will provide additional liquidity as needed.less than $20/Bbl in April.

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To mitigate some of the risk inherent in prices, we utilize various derivative financial instruments to protect a portion of our production against downside price risk. We ~~target hedging approximately 50% of~~hedge our production in a manner that systematically places hedges for several quarters in advance, allowing us to maintain a disciplined risk management program as it relates to commodity price volatility. We supplement the systematic hedging program with discretionary hedges that take advantage of favorable market conditions. For ~~additional information on~~the remainder of 2020, we have approximately 90% of our oil production hedged with an average floor price of $42/Bbl and approximately 45% of our gas production hedged with an average floor price of $2.15/Mcf. Additionally, we are currently building our 2021 hedge positions at market prices. The key terms to our oil, gas and NGL derivative ~~positions~~financial instruments as of March 31, 2020 are presented in ~~place at September 30, 2017, see~~ Note 3 in “Part I. Financial Information – Item 1. Financial Statements” inof this report.

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.

Credit Losses – Our operating cash flow is also exposed to credit risk in a variety of ways. This includes the credit risk related to customers who purchase our oil, gas and NGL production, the collection of receivables from our joint-interest partners 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 collateral postings and other protections allowed per our agreements.

Divestitures of Property and Equipment

In ~~May 2017,~~April 2020, we ~~announced a program to divest approximately $1 billion~~amended the terms on the sale of ~~upstream assets. These non-core~~our Barnett Shale assets ~~identified for monetization include select portions~~with an expected close date of December 31, 2020. Under the terms of the ~~Barnett Shale focused primarily~~agreement, we received the deposit funds of $170 million in and around Johnson County and other properties located principally within Devon’s U.S. resource base. Through September 30, 2017, Devon completed divestiture transactions totaling approximately $400 million, before purchase price adjustments.April 2020. The ~~most significant asset remaining~~deposit is being held by us pursuant to the terms of the sale agreement, which only requires us to return such funds to BKV in ~~this program is select Barnett Shale leasehold. Data rooms for~~ the ~~Barnett properties opened in September 2017 and initial bids are expected during~~event the ~~fourth quarter~~transaction does not close as a result of ~~2017.~~our breach of our closing obligations.

Capital Expenditures

~~Excluding EnLink,~~In response to the current macro-economic environment, we reduced our ~~2017~~2020 capital expenditures ~~are~~outlook by approximately $800 million, or 45% compared to the original capital budget, and expect to fund our 2020 capital program within operating cash flows, even at current depressed commodity prices. Our exploration and development budget for the remainder of 2020 is expected to range from ~~$2.4~~$0.6 billion to ~~$2.5 billion, including $2.0 billion~~$0.7 billion. As economic factors change, we will continue to ~~$2.1 billion for~~be flexible with our ~~exploration and development~~ capital program. O~~ur capital expenditures excluding EnLink were $1.7 billion in the first nine months~~

Table of ~~2017 and are forecasted to range from $0.7 billion to $0.8 billion in the fourth quarter of 2017.~~Contents

Credit Availability

~~We have a $3.0 billion Senior Credit Facility.~~ As of ~~September 30, 2017,~~March 31, 2020, we had approximately ~~$2.9~~$3.0 billion of available borrowing capacity under ~~this facility, net of $59 million in outstanding letters of credit, and were in compliance with the facility’s financial covenant.~~our Senior Credit Facility. This credit facility supports our $3.0 billion of short-term credit under our commercial paper program. At ~~September 30, 2017,~~March 31, 2020, there were no borrowings under our commercial paper ~~program.~~

~~EnLink Liquidity~~

~~EnLink has a $1.5 billion unsecured revolving credit facility. The General Partner has a $250 million secured revolving credit facility. As of September 30, 2017, there~~program, and we were ~~$9 million~~ in ~~outstanding letters of credit and no outstanding borrowings under~~compliance with the ~~$1.5 billion credit facility and $74 million in outstanding borrowings under the $250 million credit facility. All of EnLink’s and the General Partner’s debt is non-recourse to Devon.~~

In January 2017, EnLink paid the first $250 million installment payment related to the 2016 Anadarko Basin gathering and processing midstream assets acquisition. The remaining $250 million installment payment is payable by January 2018.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 ~~near-term and long-term~~ production growth opportunities. Our credit rating from Standard and Poor’s Financial Services is BBB- with a negative outlook. Our credit rating from Fitch is BBB with a stable outlook. ~~In March 2017, Fitch Ratings affirmed our BBB+~~Our credit rating ~~and revised our outlook to stable~~ from ~~negative. In April 2017,~~ Moody’s Investor Service ~~upgraded our credit rating from Ba2 to~~is Ba1 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~~Share Repurchase Program

In December 2019, our Board of Directors approved a $1.0 billion share repurchase program that expires on December 31, 2020. Through March 31, 2020, we had executed $38 million of the authorized program. However, as the pricing and economic environment has deteriorated due to the COVID-19 pandemic and demand challenges for commodities, we have temporarily suspended our share repurchase program to preserve liquidity. Additionally, due to the amended terms of our ~~or EnLink’s contractual debt obligations that would accelerate scheduled maturities should a debt rating fall below a specified level. However, these downgrades could adversely impact our~~Barnett Shale divestiture, we do not anticipate being able to purchase more than $200 million of the $1.0 billion authorization by the program expiration date. We will monitor economic conditions as they develop and ~~EnLink’s interest rate on any credit facility borrowings~~may resume share repurchases of the remaining $162 million, subject to the commodity price environment, the Company’s liquidity and ~~the ability to economically access debt markets in the future.~~

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capital resources and other factors.

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. ~~At September 30, 2017,~~Due to an unprecedented downturn in the commodity price environment and the resulting asset impairments, Devon had significant deferred tax assets at March 31, 2020. Accordingly, we ~~continued to~~ have reassessed the realizability of our deferred tax assets in future periods and have recorded a 100% valuation allowance against the U.S. deferred tax assets that largely resulted from prior year cumulative financial losses primarily due to full cost impairments. Further, we continue to record a partial valuation allowance against certain Canadianour net deferred tax assets.

~~The accruals~~Valuation of Long-Lived Assets

Long-lived assets used in operations, including proved and unproved oil and gas properties, are depreciated and assessed for ~~deferred tax~~impairment annually or whenever changes in facts and circumstances indicate a possible significant deterioration in future cash flows is expected to be generated by an asset group. For DD&A calculations and impairment assessments, management groups individual assets ~~and liabilities are often~~ based on ~~assumptions~~a judgmental assessment of the lowest level (“common operating field”) for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets.

Management evaluates assets for impairment through an established process in which changes to significant assumptions such as prices, volumes and future development plans are reviewed. If, upon review, the sum of the undiscounted pre-tax cash flows is less than the carrying value of the asset group, the carrying value is written down to estimated fair value. Because there usually is a lack of quoted market prices for long-lived assets, the fair value of impaired assets is typically determined based on the present values of expected future cash flows using discount rates believed to be consistent with those used by principal market participants. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments of future production volumes, commodity prices, operating costs and capital investment plans, considering all available information at the date of review. The expected future cash flows used for impairment reviews include future production volumes associated with proved producing and risk-adjusted proved undeveloped, probable and possible reserves.

Besides the risk-adjusted estimates of reserves and future production volumes, future commodity prices are the largest driver in the variability of undiscounted pre-tax cash flows. For our impairment determinations, we historically have utilized NYMEX forward

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strip prices for the first five years and applied internally generated price forecasts for subsequent years. In response to the COVID-19 pandemic, the NYMEX forward market became highly illiquid as evidenced by materially reduced trading volumes for periods beyond 2021. Therefore, we altered our price forecast assumptions to perform our March 31, 2020 impairment computations. Specifically, we supplemented the NYMEX forward strip prices with price forecasts published by reputable investment banks and reservoir engineering firms to estimate our future revenues as of March 31, 2020.

We also estimate and escalate or de-escalate future capital and operating costs by using a method that correlates cost movements to price movements similar to recent history. To measure indicated impairments, we use a market-based weighted-average cost of capital to discount the future net cash flows. Changes to any of the reserves or market-based assumptions can significantly effect estimates of undiscounted and discounted pre-tax cash flows and impact the recognition and amount of impairments.

Reduced demand from the COVID-19 pandemic and management of production levels from Saudi Arabia and Russia caused WTI to decrease more than 60% during the first quarter of 2020. As a result, we reduced our planned 2020 capital investment 45%. With materially lower commodity prices and reduced near-term investment, we assessed all our oil and gas fields for impairment as of March 31, 2020 and recognized proved and unproved impairments totaling $2.8 billion. The impairments relate to our Anadarko Basin and Rockies fields in which our basis included acquisitions completed in 2016 and 2015, respectively, when commodity prices were much higher than they are today.

Based on our March 31, 2020 impairment evaluations, our Eagle Ford asset’s sum of undiscounted pre-tax cash flows exceeds the carrying value by less than 10%. This cushion narrowed significantly since the end of 2019 due to lower benchmark pricing and wider differentials used to estimate future commodity pricing. If prices deteriorate further and/or management significantly reduces planned capital investment in the Eagle Ford field, our Eagle Ford asset could be subject to a material impairment of capitalized costs.

Goodwill

We test goodwill for impairment annually at October 31, or more frequently if events or changes in circumstances dictate that the carrying value of goodwill may not be recoverable. We perform a qualitative assessment to determine whether it is more likely than not that the fair value of goodwill is less than its carrying amount. As part of our qualitative assessment, we considered the general macro-economic, industry and market conditions, changes in cost factors, actual and expected financial performance, significant changes in management, strategy or customers and stock performance. If the qualitative assessment determines that a quantitative goodwill impairment test is required, then the fair value is compared to the carrying value. If the fair value is less than the carrying value, an impairment charge will be recognized for the amount by which the carrying amount exceeds the fair value. Because quoted market prices are not available, the fair value is estimated based upon a valuation analyses including comparable companies and transactions and premiums paid.

Because the trading price of ~~judgment by management. These assumptions and judgments are reviewed and adjusted~~our common stock decreased 73% during the first quarter of 2020 in response to the COVID-19 pandemic, we performed a goodwill impairment test as ~~facts and circumstances change. Material changes to~~of March 31, 2020. While the cushion narrowed significantly since our ~~income tax accruals may occur~~last impairment evaluation, we concluded an impairment was not required as of March 31, 2020. The two most critical judgements included in the ~~future~~March 31, 2020, test were the period utilized to determine Devon’s market capitalization and the control premium. For the test performed as of March 31, 2020, we derived our market capitalization by using our average common stock price from the latter two thirds of March 2020, to align with the time in the quarter subsequent to a key OPEC+ meeting and the date COVID-19 was officially classified as a pandemic. We applied a control premium based on recent comparable market transactions.

Subsequent to the ~~progress~~end of ~~ongoing audits, changes~~the first quarter of 2020, Devon’s common stock price increased approximately 80% during the month of April but remains significantly less than our average trading price before the events experienced in ~~legislation~~the first quarter of 2020. Although our common stock price and commodity prices are in a period of high volatility, a sustained period of depressed commodity prices would adversely affect our estimates of future operating results, which could result in future goodwill impairments due to the potential impact on the cash flows of our operations. The impairment of goodwill has no effect on liquidity or ~~resolution~~capital resources. However, it would adversely affect our results of ~~other pending matters.~~operations in the period recognized.

For additional information regarding our critical accounting policies and estimates, see our 2019 Annual Report on Form 10-K.

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Non-GAAP Measures

We make reference to “core earnings (loss) attributable to Devon” and “core earnings (loss) per share attributable to Devon” in “Overview of ~~2017~~2020 Results” in this Item 2.2 that are not required by or presented in accordance with GAAP. These non-GAAP measures are not alternatives to GAAP measures and should not be considered in isolation or as a substitute for analysis of our results reported under GAAP. Core earnings (loss) attributable to Devon, as well as the per share amount, represent net earnings excluding certain noncash and other items that are typically excluded by securities analysts in their published estimates of our financial results. For more information on the results of discontinued operations for our Barnett Shale asset and Canadian operations, see Note 17 in “Part I. Financial Information – Item 1. Financial Statements” in this report. Our non-GAAP measures are typically used as a quarterly performance measure. Amounts excluded ~~for the third quarter and first nine months of 2017~~ relate to ~~changes in derivatives and financial instrument fair values and foreign currency, gains and losses on~~ asset ~~sales,~~ dispositions, noncash asset impairments ~~gains associated with early retirement of debt and~~ (including noncash unproved asset impairments), deferred tax asset valuation ~~allowance. Amounts excluded for the third quarter and first nine months of 2016 relate to~~allowance, fair value changes in ~~derivatives and~~derivative financial ~~instrument fair values~~instruments and foreign currency, ~~noncash asset impairments (including an impairment of goodwill),~~changes in tax legislation and restructuring and transaction costs ~~gains on asset sales, costs~~ associated with the ~~early retirement of debt and deferred tax asset valuation allowance.~~ workforce reductions in 2019.

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

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Below are reconciliations of our core earnings ~~(loss)~~ and core earnings ~~(loss)~~ per share attributable to Devon to their comparable GAAP measures.

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Three Months Ended September 30,

Nine Months Ended September 30,

Before tax

After tax

After Noncontrolling Interests

Per Share

Before tax

After tax

After Noncontrolling Interests

Per Share

(Millions, except per share amounts)

2017

Earnings attributable to Devon
    (GAAP)

$
272

$
247

$
228

$
0.43

$
1,328

$
1,277

$
1,218

$
2.31

Adjustments:

Fair value changes in financial
   instruments and foreign currency

106

40

39

0.08

(292
)

(233
)

(232
)

(0.44
)
Gains and losses on asset sales

1

1

—

—

(6
)

(4
)

(4
)

(0.01
)
Asset impairments

2

1

1

—

9

7

4

0.01

Early retirement of debt

—

—

—

—

(9
)

(7
)

(4
)

(0.01
)
Deferred tax asset valuation allowance

—

(26
)

(26
)

(0.05
)

—

(346
)

(346
)

(0.66
)
Core earnings attributable to Devon
   (Non-GAAP)

$
381

$
263

$
242

$
0.46

$
1,030

$
694

$
636

$
1.20

2016

Earnings (loss) attributable to Devon
    (GAAP)

$
1,178

$
1,007

$
993

$
1.89

$
(4,252
)

$
(4,024
)

$
(3,633
)

$
(7.22
)
Adjustments:

Fair value changes in financial
   instruments and foreign currency

(16
)

(3
)

(3
)

(0.01
)

201

91

86

0.17

Asset impairments

319

202

202

0.38

4,851

3,492

3,076

6.12

Restructuring and transaction costs

(5
)

(3
)

(3
)

(0.01
)

266

171

169

0.33

Gains on asset sales

(1,351
)

(787
)

(787
)

(1.48
)

(1,351
)

(787
)

(787
)

(1.56
)
Early retirement of debt

84

53

53

0.10

84

53

53

0.11

Deferred tax asset valuation allowance

—

(408
)

(408
)

(0.78
)

—

867

867

1.71

Core earnings (loss) attributable to
    Devon (Non-GAAP)

$
209

$
61

$
47

$
0.09

$
(201
)

$
(137
)

$
(169
)

$
(0.34
)

	Three Months Ended March 31,
	Before tax			After tax			After Noncontrolling Interests			Per Diluted Share
2020
Continuing Operations
Loss attributable to Devon (GAAP)	$	(2,107	)	$	(1,690	)	$	(1,691	)	$	(4.48	)
Adjustments:
Asset and exploration impairments		2,776			2,146			2,146			5.66
Deferred tax asset valuation allowance		—			108			108			0.28
Fair value changes in financial instruments		(619	)		(479	)		(479	)		(1.24	)
Change in tax legislation		—			(62	)		(62	)		(0.16	)
Core earnings attributable to Devon (Non-GAAP)	$	50		$	23		$	22		$	0.06
Discontinued Operations
Loss attributable to Devon (GAAP)	$	(157	)	$	(125	)	$	(125	)	$	(0.34	)
Adjustments:
Asset impairments		179			141			141			0.38
Fair value changes in foreign currency and other		10			10			10			0.03
Core earnings attributable to Devon (Non-GAAP)	$	32		$	26		$	26		$	0.07
Total
Loss attributable to Devon (GAAP)	$	(2,264	)	$	(1,815	)	$	(1,816	)	$	(4.82	)
Adjustments:
Continuing Operations		2,157			1,713			1,713			4.54
Discontinued Operations		189			151			151			0.41
Core earnings attributable to Devon (Non-GAAP)	$	82		$	49		$	48		$	0.13
2019
Continuing Operations
Loss attributable to Devon (GAAP)	$	(497	)	$	(378	)	$	(378	)	$	(0.89	)
Adjustments:
Asset dispositions		(45	)		(35	)		(35	)		(0.08	)
Asset and exploration impairments		1			1			1			0.00
Deferred tax asset valuation allowance		—			(13	)		(13	)		(0.03	)
Fair value changes in financial instruments		638			492			492			1.15
Restructuring and transaction costs		51			39			39			0.09
Core earnings attributable to Devon (Non-GAAP)	$	148		$	106		$	106		$	0.24
Discontinued Operations
Loss attributable to Devon (GAAP)	$	70		$	61		$	61		$	0.15
Adjustments:
Asset dispositions		1			1			1			0.00
Deferred tax asset valuation allowance		—			(5	)		(5	)		(0.01	)
Fair value changes in financial instruments and foreign currency and other		(3	)		(8	)		(8	)		(0.03	)
Restructuring and transaction costs		3			3			3			0.01
Core earnings attributable to Devon (Non-GAAP)	$	71		$	52		$	52		$	0.12
Total
Loss attributable to Devon (GAAP)	$	(427	)	$	(317	)	$	(317	)	$	(0.74	)
Adjustments:
Continuing Operations		645			484			484			1.13
Discontinued Operations		1			(9	)		(9	)		(0.03	)
Core earnings attributable to Devon (Non-GAAP)	$	219		$	158		$	158		$	0.36

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EBITDAX and Field-Level Cash Margin

To assess the performance of our assets, we use EBITDAX and Field-Level Cash Margin. We compute EBITDAX as net earnings from continuing operations before income tax expense; financing costs, net; exploration expenses; DD&A; asset impairments; asset disposition gains and losses; non-cash share-based compensation; non-cash valuation changes for derivatives and financial instruments; restructuring and transaction costs; accretion on discounted liabilities; and other items not related to our normal operations. Field-Level Cash Margin is computed as oil, gas and NGL revenues 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 continuing operations.

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

	Three Months Ended March 31,
	2020			2019
Net loss (GAAP)	$	(1,815	)	$	(317	)
Net (earnings) loss from discontinued operations, net of tax		125			(61	)
Financing costs, net		65			60
Income tax benefit		(417	)		(119	)
Exploration expenses		112			4
Depreciation, depletion and amortization		401			360
Asset impairments		2,666			—
Asset dispositions		—			(45	)
Share-based compensation		20			23
Derivative and financial instrument non-cash valuation changes		(619	)		638
Restructuring and transaction costs		—			51
Accretion on discounted liabilities and other		(48	)		(22	)
EBITDAX (non-GAAP)		490			572
Marketing and midstream revenues and expenses, net		18			(15	)
Commodity derivative cash settlements		(101	)		(34	)
General and administration expenses, cash-based		82			112
Field-level cash margin (non-GAAP)	$	489		$	635

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Item 3. Quantitative and ~~Qualitati~~veQualitative Disclosures About Market Risk

Commodity Price Risk

As of ~~September 30, 2017,~~March 31, 2020, we have commodity derivatives that pertain to a portion of our estimated production for the last ~~three~~nine months of ~~2017,~~2020, as well as ~~2018 and 2019.~~for 2021. The key terms to our open oil, gas and NGL derivative financial instruments are presented in Note 3in “Part I. Financial Information – Item 1. Financial Statements” in this report.

The fair values of our commodity derivatives are largely determined by the forward curves of the relevant price indices. At ~~September 30, 2017,~~March 31, 2020, a 10% change in the forward curves associated with our commodity derivative instruments would have changed our net ~~asset~~ positions by approximately ~~$170~~$140 million.

Interest Rate Risk

As of ~~September 30, 2017,~~March 31, 2020, we had total debt of ~~$10.4~~$4.3 billion. ~~Of this amount, $10.3 billion bears~~All of our debt is based on fixed interest rates averaging ~~5.3%, and $74 million is comprised of floating rate debt with interest rates averaging 3.2%~~6.0%.

As of September 30, 2017, we had open interest rate swap positions that are presented in Note 3 in “Part I. Financial Information – Item 1. Financial Statements” in this report. The fair values of our interest rate swaps are largely determined by estimates of the forward curves of the 3-month LIBOR rate. A 10% change in these forward curves would not have materially impacted our balance sheet at September 30, 2017.

Foreign Currency Risk

~~Our net assets, net earnings and cash flows from our Canadian subsidiaries are based on the U.S. dollar equivalent of such amounts measured in the~~Devon has certain Canadian dollar ~~functional currency. Assets and liabilities of~~obligations associated with its divested Canadian operations which are to be paid with the ~~Canadian subsidiaries~~cash restricted for discontinued operations. These balances are ~~translated to U.S. dollars~~remeasured using the applicable exchange rate as of the end of ~~a reporting period. Revenues, expenses and cash flow are translated using an average exchange rate during~~ the reporting period. A 10% unfavorable change in the Canadian-to-U.S. dollar exchange rate would not have materially impacted our ~~September 30, 2017~~March 31, 2020 balance ~~sheet.~~sheet for these items. See Note 17 in “Part I. Financial Information – Item 1. Financial Statements” in this report for additional information.

Our non-Canadian foreign subsidiaries have a U.S. dollar functional currency. However, certain of our subsidiaries hold Canadian-dollar cash and engage in intercompany loans with Canadian subsidiaries that are based in Canadian dollars. The value of the Canadian-dollar cash and intercompany loans increases or decreases from the remeasurement of the cash and loans into the U.S. dollar functional currency.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

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

Based on their evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of ~~September 30, 2017~~March 31, 2020 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.

4342

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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, 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 ~~2016~~2019 Annual Report on Form 10-K and other SEC filings for additional ~~information regarding certain environmental matters involving the Company.~~information.

Item 1A. Risk Factors

~~There~~Except for the addition of the pandemic risk factor discussed below, there have been no material changes to the information included in Item 1A. “Risk Factors” in our ~~2016~~2019 Annual Report on Form ~~10-K.~~10-K.

Our Business Has Been Adversely Impacted by the COVID-19 Pandemic, and We May Experience Continuing or Worsening Adverse Effects From This or Other Pandemics

Commodity Price Impacts – The COVID-19 pandemic and related economic repercussions have created significant volatility, uncertainty and turmoil in the oil and gas industry. This outbreak and the related responses of governmental authorities and others to limit the spread of the virus have significantly reduced global economic activity, resulting in an unprecedented decline in the demand for oil and other commodities. This supply-and-demand imbalance has been exacerbated by uncertainty regarding the future global supply of oil due to disputes between Russia and the members of OPEC, particularly Saudi Arabia. These factors caused a swift and material deterioration in commodity prices in early 2020, with NYMEX WTI oil prices falling from over $60/Bbl at the beginning of the year to lower than $20/Bbl as of April 2020. While OPEC and other oil producing nations agreed in April 2020 to cut production, downward pressure on commodity prices has remained and could continue for the foreseeable future. This decline in commodity prices has already adversely impacted our results of operations for the first quarter of 2020 and contributed to our recognition of a material asset impairment to our oil and gas assets during the same period. As further described in the “Risk Factors” section of our 2019 Annual Report on Form 10-K, any sustained weakness or further deterioration in commodity prices could further adversely impact our results of operations, the value of our properties and our financial condition.

The current supply-and-demand imbalance has also imposed constraints on Devon’s and other operators’ ability to store and move production to downstream markets, which has resulted in the delay or curtailment of development activity, as well as the shutting-in of producing wells. Moreover, certain regional prices have disproportionally declined relative to broader market indices in areas that have experienced acute takeaway capacity constraints, thereby potentially further reducing our realized pricing in such impacted areas. If we are forced to shut in additional production, we will likely incur greater costs to bring the associated production back online, and such costs may be significant enough that such wells may become non-economic at low commodity price levels, which may lead to decreases in our proved reserve estimates and potential impairments and associated charges to our earnings. If we are able to bring wells back online, there is no assurance that such wells will be as productive following recommencement as they were prior to being shut in.

General Financial and Economic Impacts - The negative effects of COVID-19 on economic prospects across the world have contributed to concerns for the potential of a prolonged economic slowdown and recession. Any such downturn, or a protracted period of depressed commodity prices, could have significant adverse consequences for our financial condition and liquidity, by, among other things: (i) limiting our ability to access sources of capital due to disruptions in financial markets or otherwise; and (ii) increasing the risk of a downgrade from credit rating agencies, which could trigger new credit support obligations and further adversely affect our ability to access financing or trade credit. Moreover, any such downturn could also result in similar financial constraints for our non-operating partners, purchasers of our production and other counterparties, thereby increasing the risk that such counterparties default on their obligations to us. Such defaults or more general supply chain disruptions due to the pandemic may also jeopardize the supply of materials, equipment or services for our operations. For additional information regarding liquidity and counterparty credit risks, please see the “Risk Factors” section of the 2019 Annual Report on Form 10-K.

Other Impacts - The COVID-19 pandemic and related restrictions aimed at mitigating its spread have caused us to modify certain of our business practices, including limiting employee travel, encouraging work-from-home practices and other social distancing measures. Such measures may cause disruptions to our business and operational plans, which may include shortages of employees, contractors and subcontractors. There is no certainty that these or any other future measures will be sufficient to mitigate the risks posed by the disease, including the risk of infection of key employees, and our ability to perform certain functions could be impaired by these new business practices. For example, our reliance on technology has necessarily increased due to our encouragement of remote communications and other work-from-home practices, which could make us more vulnerable to cyber attacks. See the “Risk Factors” section of the 2019 Annual Report on Form 10-K for additional information regarding cyber attack risks.

Table of Contents

The COVID-19 pandemic and its related effects continue to rapidly evolve. The ultimate extent of the impact of the COVID-19 pandemic and any other future pandemic on our business will depend on future developments, including, but not limited to, the nature, duration and spread of the disease, the responsive actions to contain its spread or address its effects and the duration, timing and severity of the related consequences on commodity prices and the economy more generally, including any recession resulting from the pandemic. Any extended period of depressed commodity prices or general economic disruption as a result of the pandemic would adversely affect our business, financial condition and results of operations. In addition, the COVID-19 pandemic has heightened, and any future pandemic could heighten, the other risks and uncertainties discussed in the “Risk Factors” section of the 2019 Annual Report on Form 10-K.

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

The following table provides information regarding purchases of our common stock that were made by us during the ~~third~~first quarter of ~~2017.~~

2020 (shares in thousands).

Period

Total Number of
Shares Purchased ⁽¹⁾

Average Price Paid
per Share

July 1 - July 31

48,112

$
32.08

August 1 - August 31

16,504

$
31.69

September 1 - September 30

1,108

$
31.81

Total

65,724

$
31.97

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⁾
January 1 - January 31		18	$	24.99		—	$	1,000
February 1 - February 29		2,175	$	18.71		1,568	$	973
March 1 - March 31		830	$	16.01		675	$	962
Total		3,023	$	18.00		2,243

~~(1)~~

~~Share repurchases represent~~(1)

In addition to shares purchased under the share repurchase program described below, these amounts also included 780,000 shares received by us from employees for the payment of personal income tax withholding on vesting transactions.

(2)

On December 17, 2019, we announced a $1.0 billion share repurchase program that has a December 31, 2020 expiration date. As of March 31, 2020, we had repurchased 2.2 million common shares for $38 million, or $16.85 per share, under our share repurchases program. Due to the amended terms of the Barnett Shale divestiture with BKV, we do not anticipate being able to repurchase more than $200 million of the $1.0 billion authorization by the program expiration date. As a result of the COVID-19 pandemic and related economic impacts, Devon has temporarily suspended its share repurchase program to preserve liquidity. Devon will monitor economic conditions as they develop and may resume share repurchases, subject to the commodity price environment, the Company’s liquidity and capital resources and other factors. Any such repurchases under the program may be made in open-market or private transactions or through the use of ASR programs. For additional information, see Note 16 in “Part I. Financial Information – Item 1. Financial Statements” of this report.

Under the Devon Plan, eligible employees ~~may purchase~~made purchases of shares of our common stock through an investment in the Devon Stock Fund, which is administered by an independent trustee. Eligible employees purchased approximately ~~10,400~~5,800 shares of our common stock in the ~~third~~first quarter of ~~2017,~~2020, at then-prevailing stock prices, that they held through their ownership in the Stock Fund. We acquired the shares of our common stock sold under the Devon Plan through open-market purchases.

Similarly, eligible Canadian employees may purchase shares of our common stock through an investment in the Canadian Plan, which is administered by an independent trustee, Sun Life Assurance Company of Canada. Shares sold under the Canadian Plan were acquired through open-market purchases. These shares and any interest in the Canadian Plan were offered and sold in reliance on the exemptions for offers and sales of securities made outside of the U.S., including under Regulation S for offers and sales of securities to employees pursuant to an employee benefit plan established and administered in accordance with the law of a country other than the U.S. In the third quarter of 2017, there were approximately 4,200 shares purchased by Canadian employees.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Table of Contents

Item 6. E~~xhibits~~Exhibits

Exhibit Number		Description


10.1*		2020 Form of Notice of Grant of Restricted Stock Award and Award Agreement under the 2017 Long-Term Incentive Plan between Devon Energy Corporation and certain officers for restricted stock awarded (CEO and EVP form).

10.2*		2020 Form of Notice of Grant of Performance Share Unit Award and Award Agreement under the 2017 Long-Term Incentive Plan between Devon Energy Corporation and certain officers for performance based restricted share units awarded (CEO and EVP form).

10.3*		2020 Form of Notice of Grant of Restricted Stock Award and Award Agreement under the 2017 Long-Term Incentive Plan between Devon Energy Corporation and certain officers for restricted stock awarded (SVP form).

10.4*		2020 Form of Notice of Grant of Performance Share Unit Award and Award Agreement under the 2017 Long-Term Incentive Plan between Devon Energy Corporation and certain officers for performance based restricted share units awarded (SVP form).

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.~~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.

Table of Contents

~~SIGNATURES~~SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

				DEVON ENERGY CORPORATION

Date: ~~November 1, 2017~~May 6, 2020				/s/ Jeremy D. Humphers
				Jeremy D. Humphers
				Senior Vice President and Chief Accounting Officer

	Three Months Ended September 30, 2016
	(Millions)
Proceeds received, net of purchase price adjustments and selling costs	$	1,653
Asset retirement obligation assumed by purchasers		250
Total consideration received		1,903

Allocated oil and gas property basis sold		355
Allocated goodwill		197
Total assets sold		552

Gain on asset sales	$	1,351

Notional		Rate Received		Rate Paid		Expiration
(Millions)
$	750	Three Month LIBOR			2.98%	December 2048 ⁽¹⁾
$	100		1.76%	Three Month LIBOR		January 2019

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(Millions)
Commodity derivatives:
Oil, gas and NGL derivatives	$	(144	)	$	79		$	214		$	(30	)
Marketing and midstream revenues		(5	)		(1	)		3			(7	)
Interest rate derivatives:
Other nonoperating items		(4	)		(20	)		(19	)		(163	)
Foreign currency derivatives:
Other nonoperating items		—			—			—			(159	)
Net gains (losses) recognized	$	(153	)	$	58		$	198		$	(359	)

	General Partner				EnLink
	Restricted		Performance		Restricted		Performance
	Incentive Units		Units		Incentive Units		Units
Unrecognized compensation cost (millions)	$	14	$	6	$	15	$	6
Weighted average period for recognition (years)		1.8		2.0		1.7		1.9

	September 30, 2016
	Three Months Ended			Nine Months Ended
	(Millions)
2016 reduction in workforce:
Employee related costs	$	(7	)	$	229
Lease obligations		—			17
Asset impairments		—			3
Transaction costs		2			17
Restructuring and transaction costs	$	(5	)	$	266

	Pension Benefits												Postretirement Benefits
	Three Months Ended						Nine Months Ended						Three Months Ended				Nine Months Ended
	September 30,						September 30,						September 30,				September 30,
	2017			2016			2017			2016			2017		2016		2017			2016
	(Millions)
Service cost	$	4		$	3		$	12		$	12		$	—	$	—	$	—		$	—
Interest cost		11			9			32			32			—		—		—			—
Expected return on plan assets		(14	)		(14	)		(41	)		(40	)		—		—		—			—
Amortization of prior service cost ⁽¹⁾		—			1			1			2			—		—		(1	)		(1	)
Net actuarial loss ⁽¹⁾		5			6			14			19			—		—		—			—
Net periodic benefit cost ⁽²⁾	$	6		$	5		$	18		$	25		$	—	$	—	$	(1	)	$	(1	)

	Amounts		Rate
	(Millions)		(Per Share)
Quarter Ended 2017:
First quarter 2017	$	32	$	0.06
Second quarter 2017		33	$	0.06
Third quarter 2017		30	$	0.06
Total year-to-date	$	95
Quarter Ended 2016:
First quarter 2016	$	125	$	0.24
Second quarter 2016		33	$	0.06
Third quarter 2016		32	$	0.06
Total year-to-date	$	190

							Fair Value
							Measurements Using:
	Carrying			Total Fair			Level 1		Level 2
	Amount			Value			Inputs		Inputs
	(Millions)
September 30, 2017 assets (liabilities):
Cash equivalents	$	1,510		$	1,510		$	1,431	$	79
Commodity derivatives	$	43		$	43		$	—	$	43
Commodity derivatives	$	(60	)	$	(60	)	$	—	$	(60	)
Interest rate derivatives	$	1		$	1		$	—	$	1
Interest rate derivatives	$	(62	)	$	(62	)	$	—	$	(62	)
Debt	$	(10,403	)	$	(11,480	)	$	—	$	(11,480	)
Installment payment	$	(243	)	$	(244	)	$	—	$	(244	)
Capital lease obligations	$	(4	)	$	(4	)	$	—	$	(4	)

December 31, 2016 assets (liabilities):
Cash equivalents	$	1,542		$	1,542		$	1,298	$	244
Commodity derivatives	$	10		$	10		$	—	$	10
Commodity derivatives	$	(203	)	$	(203	)	$	—	$	(203	)
Interest rate derivatives	$	1		$	1		$	—	$	1
Interest rate derivatives	$	(41	)	$	(41	)	$	—	$	(41	)
Debt	$	(10,154	)	$	(10,760	)	$	—	$	(10,760	)
Installment payment	$	(473	)	$	(477	)	$	—	$	(477	)
Capital lease obligations	$	(7	)	$	(6	)	$	—	$	(6	)

	U.S.			Canada			EnLink			Eliminations			Total
	(Millions)
Three Months Ended September 30, 2017:
Revenues from external customers	$	1,575		$	358		$	1,223		$	—		$	3,156
Asset dispositions and other	$	1		$	—		$	(1	)	$	—		$	—
Intersegment revenues	$	—		$	—		$	174		$	(174	)	$	—
Depreciation, depletion and amortization	$	195		$	63		$	142		$	—		$	400
Interest expense	$	82		$	17		$	49		$	(15	)	$	133
Asset impairments	$	—		$	—		$	2		$	—		$	2
Earnings before income taxes	$	167		$	85		$	20		$	—		$	272
Income tax expense	$	(5	)	$	28		$	2		$	—		$	25
Net earnings	$	172		$	57		$	18		$	—		$	247
Net earnings attributable to noncontrolling interests	$	—		$	—		$	19		$	—		$	19
Net earnings (loss) attributable to Devon	$	172		$	57		$	(1	)	$	—		$	228
Capital expenditures, including acquisitions	$	560		$	103		$	170		$	—		$	833
Three Months Ended September 30, 2016:
Revenues from external customers	$	1,653		$	305		$	924		$	—		$	2,882
Asset dispositions and other	$	1,351		$	—		$	—		$	—		$	1,351
Intersegment revenues	$	—		$	—		$	180		$	(180	)	$	—
Depreciation, depletion and amortization	$	196		$	72		$	126		$	—		$	394
Interest expense	$	185		$	34		$	49		$	(23	)	$	245
Asset impairments	$	317		$	2		$	—		$	—		$	319
Restructuring and transaction costs	$	(10	)	$	5		$	—		$	—		$	(5	)
Earnings before income taxes	$	1,122		$	37		$	19		$	—		$	1,178
Income tax expense	$	5		$	159		$	7		$	—		$	171
Net earnings (loss)	$	1,117		$	(122	)	$	12		$	—		$	1,007
Net earnings attributable to noncontrolling interests	$	—		$	—		$	14		$	—		$	14
Net earnings (loss) attributable to Devon	$	1,117		$	(122	)	$	(2	)	$	—		$	993
Capital expenditures, including acquisitions	$	277		$	48		$	132		$	—		$	457
Nine Months Ended September 30, 2017:
Revenues from external customers	$	5,547		$	951		$	3,468		$	—		$	9,966
Asset dispositions and other	$	11		$	—		$	(1	)	$	—		$	10
Intersegment revenues	$	—		$	—		$	515		$	(515	)	$	—
Depreciation, depletion and amortization	$	556		$	199		$	407		$	—		$	1,162
Interest expense	$	243		$	48		$	133		$	(42	)	$	382
Asset impairments	$	—		$	—		$	9		$	—		$	9
Earnings before income taxes	$	1,133		$	126		$	69		$	—		$	1,328
Income tax expense	$	—		$	42		$	9		$	—		$	51
Net earnings	$	1,133		$	84		$	60		$	—		$	1,277
Net earnings attributable to noncontrolling interests	$	—		$	—		$	59		$	—		$	59
Net earnings attributable to Devon	$	1,133		$	84		$	1		$	—		$	1,218
Property and equipment, net	$	7,726		$	2,787		$	6,569		$	—		$	17,082
Total assets	$	13,302		$	3,761		$	10,548		$	(52	)	$	27,559
Capital expenditures, including acquisitions	$	1,460		$	275		$	636		$	—		$	2,371
Nine Months Ended September 30, 2016:
Revenues from external customers	$	4,320		$	688		$	2,488		$	—		$	7,496
Asset dispositions and other	$	1,351		$	—		$	—		$	—		$	1,351
Intersegment revenues	$	—		$	—		$	539		$	(539	)	$	—
Depreciation, depletion and amortization	$	763		$	284		$	373		$	—		$	1,420
Interest expense	$	400		$	101		$	140		$	(66	)	$	575
Asset impairments	$	2,810		$	1,168		$	873		$	—		$	4,851
Restructuring and transaction costs	$	245		$	15		$	6		$	—		$	266
Loss before income taxes	$	(2,040	)	$	(1,359	)	$	(853	)	$	—		$	(4,252	)
Income tax expense (benefit)	$	(6	)	$	(223	)	$	1		$	—		$	(228	)
Net loss	$	(2,034	)	$	(1,136	)	$	(854	)	$	—		$	(4,024	)
Net earnings (loss) attributable to noncontrolling interests	$	1		$	—		$	(392	)	$	—		$	(391	)
Net loss attributable to Devon	$	(2,035	)	$	(1,136	)	$	(462	)	$	—		$	(3,633	)
Property and equipment, net	$	7,196		$	2,778		$	6,195		$	—		$	16,169
Total assets	$	12,317		$	4,355		$	10,197		$	(56	)	$	26,813
Capital expenditures, including acquisitions	$	2,454		$	158		$	816		$	—		$	3,428

	Three Months Ended September 30,							Nine Months Ended September 30, ⁽³⁾
	2017		2016		Change			2017		2016			Change
	(Millions, except per share amounts)
Net earnings (loss) attributable to Devon	$	228	$	993		- 77	%	$	1,218	$	(3,633	)		N/M
Net earnings (loss) per diluted share attributable to Devon	$	0.43	$	1.89		- 77	%	$	2.31	$	(7.22	)		N/M
Core earnings (loss) attributable to Devon⁽¹⁾	$	242	$	47		+415	%	$	636	$	(169	)		N/M
Core earnings (loss) per diluted share attributable to Devon ⁽¹⁾	$	0.46	$	0.09		+411	%	$	1.20	$	(0.34	)		N/M
Retained production (MBoe/d)		527		550		- 4	%		542		578			- 6	%
Total production (MBoe/d)		527		577		- 9	%		542		635			- 15	%
Realized price per Boe ⁽²⁾	$	25.67	$	20.98		+22	%	$	25.41	$	17.37			+46	%
Operating cash flow	$	776	$	727		+7	%	$	2,420	$	1,237			+96	%
Capital expenditures, including acquisitions	$	833	$	457		+82	%	$	2,371	$	3,428			- 31	%
Shareholder and noncontrolling interests distributions	$	114	$	109		+5	%	$	342	$	414			- 17	%
Cash and cash equivalents								$	2,781	$	2,385			+17	%
Total debt								$	10,403	$	11,354			- 8	%

	Three Months Ended September 30,							Nine Months Ended September 30,
	2017 ⁽¹⁾		2016 ⁽¹⁾		Change			2017 ⁽¹⁾		2016 ⁽¹⁾		Change
Oil (per Bbl)
U.S.	$	47.12	$	42.51		+11	%	$	47.84	$	36.89		+30	%
Canada	$	35.02	$	27.46		+28	%	$	32.77	$	22.26		+47	%
Total	$	45.41	$	40.12		+13	%	$	45.83	$	34.78		+32	%
Bitumen (per Bbl)
Canada	$	31.75	$	23.00		+38	%	$	28.49	$	17.77		+60	%
Gas (per Mcf)
U.S.	$	2.45	$	2.24		+10	%	$	2.54	$	1.70		+50	%
NGLs (per Bbl)
U.S.	$	15.15	$	9.80		+55	%	$	14.62	$	8.84		+65	%
Combined (per Boe)
U.S.	$	23.85	$	20.26		+18	%	$	24.44	$	17.16		+42	%
Canada	$	31.59	$	23.23		+36	%	$	28.50	$	18.15		+57	%
Total	$	25.67	$	20.98		+22	%	$	25.41	$	17.37		+46	%

	Three Months Ended September 30,
	Oil			Bitumen			Gas			NGLs			Total
	(Millions)
2016 sales	$	502		$	244		$	273		$	94		$	1,113
Change due to volumes		(23	)		(26	)		(25	)		(9	)		(83	)
Change due to prices		63			83			23			46			215
2017 sales	$	542		$	301		$	271		$	131		$	1,245

	Nine Months Ended September 30,
	Oil			Bitumen			Gas			NGLs			Total

	(Millions)
2016 sales	$	1,523		$	512		$	688		$	300		$	3,023
Change due to volumes		(243	)		16			(125	)		(68	)		(420	)
Change due to prices		407			319			279			152			1,157
2017 sales	$	1,687		$	847		$	842		$	384		$	3,760

	Three Months Ended September 30, 2017
	Oil			Bitumen		Gas			NGLs			Boe
	(Per Bbl)			(Per Bbl)		(Per Mcf)			(Per Bbl)			(Per Boe)
Realized price without hedges	$	45.41		$	31.75	$	2.45		$	15.15		$	25.67
Cash settlements of hedges		0.96			—		0.12			(0.03	)		0.52
Realized price, including cash settlements	$	46.37		$	31.75	$	2.57		$	15.12		$	26.19
				��
	Three Months Ended September 30, 2016
	Oil			Bitumen		Gas			NGLs			Boe
	(Per Bbl)			(Per Bbl)		(Per Mcf)			(Per Bbl)			(Per Boe)
Realized price without hedges	$	40.12		$	23.00	$	2.24		$	9.80		$	20.98
Cash settlements of hedges		1.56			—		(0.04	)		0.10			0.32
Realized price, including cash settlements	$	41.68		$	23.00	$	2.20		$	9.90		$	21.30

	Nine Months Ended September 30, 2017
	Oil			Bitumen		Gas			NGLs			Boe
	(Per Bbl)			(Per Bbl)		(Per Mcf)			(Per Bbl)			(Per Boe)
Realized price without hedges	$	45.83		$	28.49	$	2.54		$	14.62		$	25.41
Cash settlements of hedges		0.80			—		0.05			(0.02	)		0.29
Realized price, including cash settlements	$	46.63		$	28.49	$	2.59		$	14.60		$	25.70

	Nine Months Ended September 30, 2016
	Oil			Bitumen		Gas			NGLs			Boe
	(Per Bbl)			(Per Bbl)		(Per Mcf)			(Per Bbl)			(Per Boe)
Realized price without hedges	$	34.78		$	17.77	$	1.70		$	8.84		$	17.37
Cash settlements of hedges		(0.94	)		—		0.12			(0.06	)		0.02
Realized price, including cash settlements	$	33.84		$	17.77	$	1.82		$	8.78		$	17.39

	Devon						EnLink						Consolidated
	2017			2016			2017			2016			2017			2016
	(Millions)
Operating cash flow	$	1,892		$	724		$	528		$	513		$	2,420		$	1,237
Divestitures of property and equipment		321			1,884			2			5			323			1,889
Issuance of common stock		—			1,469			—			—			—			1,469
Proceeds from sale of investment		—			—			190			—			190			—
Capital expenditures		(1,541	)		(1,235	)		(662	)		(424	)		(2,203	)		(1,659	)
Acquisitions of property, equipment and businesses		(39	)		(849	)		—			(792	)		(39	)		(1,641	)
Debt activity, net		—			(1,946	)		252			178			252			(1,768	)
Payment of installment payable		—			—			(250	)		—			(250	)		—
Shareholder and noncontrolling interests distributions		(95	)		(190	)		(247	)		(224	)		(342	)		(414	)
EnLink and General Partner distributions		199			199			(199	)		(199	)		—			—
Issuance of subsidiary units		—			—			486			835			486			835
Effect of exchange rate and other		(45	)		(23	)		30			150			(15	)		127
Net change in cash and cash equivalents	$	692		$	33		$	130		$	42		$	822		$	75
Cash and cash equivalents at end of period	$	2,639		$	2,325		$	142		$	60		$	2,781		$	2,385