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

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

On April ~~22, 2020, 382.7~~21, 2021, 676.9 million shares of common stock were outstanding.

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

~~“ASR” means an accelerated share-repurchase transaction with a financial institution to repurchase Devon’s common stock.~~

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

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

“~~E&P”~~Federal Funds Rate” means ~~exploration and production activities.~~

~~“FASB” means Financial Accounting Standards Board.~~the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.

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

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

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

“~~OPIS”~~QLCP” means ~~Oil Price Information Service.~~QL Capital Partners, LP

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

This report includes “forward-looking statements” as defined by the SEC. Such statements include those concerning strategic plans, our expectations and objectives for future operations, as well as other future events or conditions, and are often identified by use of the words and phrases “expects,” “believes,” “will,” “would,” “could,” “continue,” “may,” “aims,” “likely to be,” “intends,” “forecasts,” “projections,” “estimates,” “plans,” “expectations,” “targets,” “opportunities,” “potential,” “anticipates,” “outlook” and other similar terminology. All statements, other than statements of historical facts, included in this report that address activities, events or developments that Devon expects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control. Consequently, actual future results could differ materially and adversely from our expectations due to a number of factors, including, but not limited ~~to those, identified below.~~to:

The COVID-19 pandemic and its related repercussions have created significant volatility, uncertainty and turmoil in the global economy and our industry. This turmoil has included an unprecedented supply-and-demand imbalance for oil and other 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 the COVID-19 pandemic and related impacts, including, among other things: contributing to 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 access sources of capital due to disruptions in financial markets; increasing the risk of a downgrade from credit rating agencies; exacerbating counterparty credit risks and the risk of supply chain interruptions; and increasing the risk of operational disruptions due to social distancing measures and other changes to business practices.

In addition to the risks associated with the 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:

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.

	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
	(Unaudited)						(Unaudited)
Upstream revenues	$	1,527		$	314
Oil, gas and NGL sales							$	1,788		$	807
Oil, gas and NGL derivatives								(528	)		720
Marketing and midstream revenues		560			765			502			560
Total revenues		2,087			1,079			1,762			2,087
Production expenses		318			283			489			318
Exploration expenses		112			4			3			112
Marketing and midstream expenses		578			750			523			578
Depreciation, depletion and amortization		401			360			467			401
Asset impairments		2,666			—			—			2,666
Asset dispositions		—			(45	)		(32	)		—
General and administrative expenses		102			135			107			102
Financing costs, net		65			60			77			65
Restructuring and transaction costs		—			51			189			—
Other expenses		(48	)		(22	)
Other, net								(29	)		(48	)
Total expenses		4,194			1,576			1,794			4,194
Loss from continuing operations before income taxes		(2,107	)		(497	)		(32	)		(2,107	)
Income tax benefit		(417	)		(119	)		(248	)		(417	)
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 (loss) from continuing operations								216			(1,690	)
Net loss from discontinued operations, net of income taxes								—			(125	)
Net earnings (loss)								216			(1,815	)
Net earnings attributable to noncontrolling interests		1			—			3			1
Net loss attributable to Devon	$	(1,816	)	$	(317	)
Net earnings (loss) attributable to Devon							$	213		$	(1,816	)
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	)
Basic earnings (loss) from continuing operations per share							$	0.33		$	(4.48	)
Basic loss from discontinued operations per share								—			(0.34	)
Basic net earnings (loss) per share							$	0.33		$	(4.82	)
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	)
Diluted earnings (loss) from continuing operations per share							$	0.32		$	(4.48	)
Diluted loss from discontinued operations per share								—			(0.34	)
Diluted net earnings (loss) per share							$	0.32		$	(4.82	)
Comprehensive earnings (loss):
Net loss	$	(1,815	)	$	(317	)
Other comprehensive earnings, net of tax:
Foreign currency translation, discontinued operations		—			35
Net earnings (loss)							$	216		$	(1,815	)
Other comprehensive earnings (loss), net of tax:
Pension and postretirement plans		1			2			23			1
Other comprehensive earnings, net of tax		1			37			23			1
Comprehensive loss:		(1,814	)		(280	)
Comprehensive earnings (loss):							$	239		$	(1,814	)
Comprehensive earnings attributable to noncontrolling interests		1			—			3			1
Comprehensive loss attributable to Devon	$	(1,815	)	$	(280	)
Comprehensive earnings (loss) attributable to Devon							$	236		$	(1,815	)

	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
	(Unaudited)						(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	)
Net earnings (loss)							$	216		$	(1,815	)
Adjustments to reconcile net earnings (loss) to net cash from operating activities:
Net loss from discontinued operations, net of income taxes								—			125
Depreciation, depletion and amortization		401			360			467			401
Asset impairments		2,666			—			—			2,666
Leasehold impairments		110			1			1			110
Accretion on discounted liabilities		8			9
(Amortization) accretion of liabilities								(54	)		8
Total (gains) losses on commodity derivatives		(720	)		605			528			(720	)
Cash settlements on commodity derivatives		101			31			(232	)		101
Gains on asset dispositions		—			(45	)		(32	)		—
Deferred income tax benefit		(311	)		(115	)		(243	)		(311	)
Share-based compensation		20			44			41			20
Other		—			(14	)
Early retirement of debt								27			—
Changes in assets and liabilities, net		(56	)		(61	)		(127	)		(56	)
Net cash from operating activities - continuing operations		529			437			592			529
Cash flows from investing activities:
Capital expenditures		(425	)		(490	)		(499	)		(425	)
Acquisitions of property and equipment		(4	)		(10	)		—			(4	)
Divestitures of property and equipment		25			310			15			25
WPX acquired cash								344			—
Distributions from equity method investments								10			—
Net cash from investing activities - continuing operations		(404	)		(190	)		(130	)		(404	)
Cash flows from financing activities:
Repayments of long-term debt		—			(162	)		(533	)		—
Early retirement of debt								(27	)		—
Repurchases of common stock		(38	)		(999	)		—			(38	)
Dividends paid on common stock		(34	)		(34	)		(203	)		(34	)
Contributions from noncontrolling interests		5			—			—			5
Distributions to noncontrolling interests		(3	)		—			(4	)		(3	)
Acquisition of noncontrolling interests								(24	)		—
Shares exchanged for tax withholdings		(17	)		(19	)		(33	)		(17	)
Net cash from financing activities - continuing operations		(87	)		(1,214	)		(824	)		(87	)
Effect of exchange rate changes on cash - continuing operations								3			—
Net change in cash, cash equivalents and restricted cash of continuing operations		38			(967	)		(359	)		38
Cash flows from discontinued operations:
Operating activities		(131	)		(59	)		0			(131	)
Investing activities		(1	)		(59	)		0			(1	)
Financing activities		—			(7	)		0			0
Effect of exchange rate changes on cash		(23	)		1			0			(23	)
Net change in cash, cash equivalents and restricted cash of discontinued operations		(155	)		(124	)		0			(155	)
Net change in cash, cash equivalents and restricted cash		(117	)		(1,091	)		(359	)		(117	)
Cash, cash equivalents and restricted cash at beginning of period		1,844			2,446			2,237			1,844
Cash, cash equivalents and restricted cash at end of period	$	1,727		$	1,355		$	1,878		$	1,727

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	1,527		$	1,327		$	1,683		$	1,527
Cash restricted for discontinued operations		200			—
Restricted cash included in other current assets		—			28
Restricted cash								195			200
Total cash, cash equivalents and restricted cash	$	1,727		$	1,355		$	1,878		$	1,727

	March 31, 2020			December 31, 2019			March 31, 2021			December 31, 2020
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,527		$	1,464
Cash restricted for discontinued operations		200			380
Cash, cash equivalents and restricted cash							$	1,878		$	2,237
Accounts receivable		594			832			1,089			601
Current assets associated with discontinued operations		736			896
Income taxes receivable								166			174
Other current assets		998			279			334			248
Total current assets		4,055			3,851			3,467			3,260
Oil and gas property and equipment, based on successful efforts accounting, net		4,756			7,558			13,826			4,436
Other property and equipment, net ($89 and $80 million related to CDM in 2020 and 2019, respectively)		1,024			1,035
Other property and equipment, net ($106 million and $102 million related to CDM in 2021 and 2020, respectively)								1,448			957
Total property and equipment, net		5,780			8,593			15,274			5,393
Goodwill		753			753			753			753
Right-of-use assets		237			243			255			223
Investments								402			12
Other long-term assets		245			196			306			271
Long-term assets associated with discontinued operations		74			81
Total assets	$	11,144		$	13,717		$	20,457		$	9,912
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	444		$	428		$	564		$	242
Revenues and royalties payable		617			730			909			662
Current liabilities associated with discontinued operations		294			459
Short-term debt								226			—
Other current liabilities		199			310			1,246			536
Total current liabilities		1,554			1,927			2,945			1,440
Long-term debt		4,295			4,294			7,042			4,298
Lease liabilities		245			244			260			246
Asset retirement obligations		386			380			455			358
Other long-term liabilities		461			426			1,269			551
Long-term liabilities associated with discontinued operations		163			185
Deferred income taxes		—			341
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
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 675 million and 382 million shares in 2021 and 2020, respectively								67			38
Additional paid-in capital		2,701			2,735			8,172			2,766
Retained earnings		1,298			3,148			218			208
Accumulated other comprehensive loss		(118	)		(119	)		(104	)		(127	)
Total stockholders’ equity attributable to Devon		3,919			5,802			8,353			2,885
Noncontrolling interests		121			118			133			134
Total equity		4,040			5,920			8,486			3,019
Total liabilities and equity	$	11,144		$	13,717		$	20,457		$	9,912

										Retained			Other																				Retained			Other
							Additional			Earnings			Comprehensive																	Additional			Earnings			Comprehensive
	Common Stock						Paid-In			(Accumulated			Earnings			Treasury			Noncontrolling			Total			Common Stock					Paid-In			(Accumulated			Earnings			Treasury			Noncontrolling			Total
	Shares			Amount			Capital			Deficit)			(Loss)			Stock			Interests			Equity			Shares			Amount		Capital			Deficit)			(Loss)			Stock			Interests			Equity
	(Unaudited)																								(Unaudited)
Three Months Ended March 31, 2021
Balance as of December 31, 2020																										382		$	38	$	2,766		$	208		$	(127	)	$	—		$	134		$	3,019
Net earnings																										—			—		—			213			—			—			3			216
Other comprehensive earnings, net of tax																										—			—		—			—			23			—			—			23
Restricted stock grants, net of cancellations																										4			—		—			—			—			—			—			—
Common stock repurchased																										—			—		—			—			—			(38	)		—			(38	)
Common stock retired																										(2	)		—		(38	)		—			—			38			—			—
Common stock dividends																										—			—		—			(203	)		—			—			—			(203	)
Common stock issued																										290			29		5,403			—			—			—			—			5,432
Share-based compensation																										1			—		41			—			—			—			—			41
Contributions from noncontrolling interests																										—			—		—			—			—			—			—			—
Distributions to noncontrolling interests																										—			—		—			—			—			—			(4	)		(4	)
Balance as of March 31, 2021																										675		$	67	$	8,172		$	218		$	(104	)	$	—		$	133		$	8,486
Three Months Ended March 31, 2020
Balance as of December 31, 2019		382		$	38		$	2,735		$	3,148		$	(119	)	$	—		$	118		$	5,920			382		$	38	$	2,735		$	3,148		$	(119	)	$	—		$	118		$	5,920
Net earnings (loss)		—			—			—			(1,816	)		—			—			1			(1,815	)		—			—		—			(1,816	)		—			—			1			(1,815	)
Other comprehensive earnings, net of tax		—			—			—			—			1			—			—			1			—			—		—			—			1			—			—			1
Restricted stock grants, net of cancellations		3			—			—			—			—			—			—			—			3			—		—			—			—			—			—			—
Common stock repurchased		—			—			—			—			—			(54	)		—			(54	)		—			—		—			—			—			(54	)		—			(54	)
Common stock retired		(3	)		—			(54	)		—			—			54			—			—			(3	)		—		(54	)		—			—			54			—			—
Common stock dividends		—			—			—			(34	)		—			—			—			(34	)		—			—		—			(34	)		—			—			—			(34	)
Share-based compensation		1			—			20			—			—			—			—			20			1			—		20			—			—			—			—			20
Contributions from noncontrolling interests		—			—			—			—			—			—			5			5			—			—		—			—			—			—			5			5
Distributions to noncontrolling interests		—			—			—			—			—			—			(3	)		(3	)		—			—		—			—			—			—			(3	)		(3	)
Balance as of March 31, 2020		383		$	38		$	2,701		$	1,298		$	(118	)	$	—		$	121		$	4,040			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		—			—			—			(317	)		—			—			—			(317	)
Other comprehensive earnings, net of tax		—			—			—			—			37			—			—			37
Restricted stock grants, net of cancellations		3			—			—			—			—			—			—			—
Common stock repurchased		—			—			—			—			—			(1,042	)		—			(1,042	)
Common stock retired		(36	)		(3	)		(1,014	)		—			—			1,017			—			—
Common stock dividends		—			—			—			(34	)		—			—			—			(34	)
Share-based compensation		—			—			46			—			—			—			—			46
Balance as of March 31, 2019		417		$	42		$	3,518		$	3,280		$	1,064		$	(47	)	$	—		$	7,857

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 ~~2019~~2020 Annual Report on Form 10-K.

The accompanying unaudited interim financial statements in this report reflect all adjustments that are, in the opinion of management, necessary for a fair statement of Devon’s results of operations and cash flows for the three-month periods ended March 31, ~~2020~~2021 and ~~2019~~2020 and Devon’s financial position as of March 31, ~~2020.~~ 2021.

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

As further discussed in Note 1718, Devon ~~reached an agreement to sell~~closed on the sale of its Barnett Shale assets in ~~December 2019, which was amended in April~~October 2020 ~~and sold its Canadian operations on June 27, 2019~~. ~~Activity~~Prior to December 31, 2020, activity relating to Devon’s Barnett Shale assets inclusive of properties divested as partial sales of the Barnett Shale common operating field in previous reporting periods located primarily in Johnson and Wise counties, Texas, and its Canadian operations areis classified as discontinued operations within Devon’s consolidated statements of comprehensive earnings and consolidated statements of cash flows. ~~The associated assets and liabilities~~

As of ~~Devon’s Barnett Shale assets and Canadian operations are presented~~March 31, 2021, Devon classified approximately $185 million of cash as ~~assets and liabilities associated with discontinued operations~~restricted cash on the consolidated balance sheets for obligations associated with the abandonment of certain gas processing contracts related to divestitures of other Barnett Shale assets that occurred in 2018 and obligations retained related to the Canadian business. Cash payments for these charges related to the Barnett assets and Canada business total approximately $10. million per quarter.

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

In conjunction with the Merger, Devon acquired an interest in Catalyst which is a joint venture established between WPX and Howard Energy Partners (“HEP”) to develop oil gathering and natural gas processing infrastructure in the Stateline area of the Delaware Basin. Under the terms of the agreement, Devon and HEP each have a 50 percent voting interest in the joint venture legal entity and HEP serves as the operator. Through 2038, Devon’s production from 50,000 net acres in the Stateline area of the Delaware Basin has been dedicated to Catalyst subject to fixed-fee oil gathering and natural gas processing agreements. The agreements do not include any minimum volume commitments. Devon accounts for the investment in Catalyst as an equity method investment. Devon’s investment in Catalyst is shown within investments on the consolidated balance sheet and Devon’s share of Catalyst earnings are reflected as a component of other, net in the accompanying consolidated statements of comprehensive earnings.

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

On January 7, 2021, Devon and WPX completed an all-stock merger of equals. WPX was an oil and gas exploration and production company with assets in the Delaware Basin in Texas and New Mexico and the Williston Basin in North Dakota. On the closing date of the Merger, each share of WPX common stock was automatically converted into the right to receive 0.5165 of a share of Devon common stock. No fractional shares of Devon’s common stock were issued in the Merger, and holders of WPX common stock instead received cash in lieu of fractional shares of Devon common stock, if any. Based on the closing price of Devon’s common stock on January 7, 2021, the total value of Devon common stock issued to holders of WPX common stock as part of this transaction was approximately $5.4 billion. The Merger was structured as a tax-free reorganization for United States federal income tax purposes.

The transaction has been accounted for using the acquisition method of accounting, with Devon being treated as the accounting acquirer. Under the acquisition method of accounting, the assets and liabilities of WPX and its subsidiaries have been recorded at their respective fair values as of the date of completion of the Merger and added to Devon’s. The preliminary purchase price assessment remains an ongoing process and is subject to change for up to one year subsequent to the closing date of the Merger. Determining the fair value of the assets and liabilities of WPX requires judgment and certain assumptions to be made, the most significant of these being related to the valuation of WPX’s oil and gas properties. The inputs and assumptions related to the oil and gas properties are categorized as level 3 in the fair value hierarchy.

The following table represents the preliminary allocation of the total purchase price of WPX to the identifiable assets acquired and the liabilities assumed based on the fair values as of the acquisition date.

The following table represents WPX’s revenues and earnings included in Devon’s consolidated comprehensive statements of earnings subsequent to the closing date of the Merger.

Due to the ~~FASB issued ASU 2016-13,~~ ~~Financial Instruments-Credit Losses.~~ This ASU changes the impairment model for trade receivables, held-to-maturity debt securities, net investments in 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 ASUMerger closing on January 7, 2021, all activity in the first quarter of 2021 except for the first six days of January is included in Devon’s consolidated statements of comprehensive earnings. The following unaudited pro forma financial information for the three months ended March 31, 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 assessmentis based on our historical ~~losses and a probability~~consolidated financial statements adjusted to reflect as if the Merger had occurred on January 1, 2020. The information below reflects pro forma adjustments to conform WPX’s historical financial information to Devon’s financial statement presentation. The unaudited pro forma financial information is not necessarily indicative of what would have occurred if the Merger had been completed as of the beginning of the periods presented, nor is it indicative of future 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.results.

~~In June 2019,~~On March 3, 2021, Devon completed the sale of ~~substantially all~~non-core assets in the Rockies for proceeds of ~~its oil and gas assets and operations in Canada to Canadian Natural Resources Limited for proceeds,~~$9 million, net of purchase price adjustments, ~~of $2.6 billion ($3.4 billion Canadian dollars),~~ and recognized a ~~pre-tax~~$35 million gain related to the sale. The transaction includes contingent earnout payments of ~~$223 million ($425 million, net~~up to $8 million. The total estimated proved reserves associated with these divested assets are approximately 3 MMBoe. As of ~~tax, primarily due to a significant deferred tax benefit). Additional information can be found~~December 31, 2020, the associated assets and liabilities were classified as assets held for sale and included in ~~Note 17~~.other current assets and other current liabilities, respectively.

On October 1, 2020, Devon ~~announced~~completed the sale of its Barnett Shale assets to BKV ~~in December 2019 and 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~~proceeds, net of purchase price adjustments, of $490 million. The agreement with BKV also provides for contingent earnout payments to Devon of up to $260 million based upon future commodity prices, with upside participation beginning at ~~closing, which was extended to December 31, 2020.~~a $2.75 Henry Hub natural gas price or a $50 WTI oil price. The contingent payment period commenced on January 1, 2021 and has a term of four years. Devon recognized a $748 million asset impairment related to these assets in the fourth quarter of 2019 and an incremental asset impairments of $179 million ~~asset impairment~~and $3 million during the first quarter and third quarter of ~~2020.~~2020, respectively. Additional information can be found inNote 1718.

During the first quarter of 2020, Devon 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 the first quarter of 2019, Devon received proceeds of approximately $300 million and recognized a $45 million net gain on asset dispositions, primarily from sales of non-core assets in the Permian Basin. In aggregate, the total estimated proved reserves associated with these divested assets were approximately 25 MMBoe.

Devon enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production to hedge future prices received. Additionally, Devon periodically enters into derivative financial instruments with respect to a portion of its oil, gas and NGL marketing activities. These commodity derivative financial instruments include financial price swaps, price swaptions, basis swaps, ~~and~~ costless price ~~collars.~~collars and call options. Devon periodically enters into interest rate swaps to manage its exposure to interest rate volatility. As of March 31, ~~2020,~~2021, Devon did not have any open interest rate swap contracts.

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

By using derivative financial instruments, Devon is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with a number of

counterparties whom Devon believes are acceptable credit risks. It is Devon’s policy to enter into derivative contracts only with investment-grade rated counterparties deemed by management to be competent and competitive market makers. Additionally, Devon’s derivative contracts generally contain provisions that provide for collateral payments if Devon’s or its counterparty’s credit rating falls below certain credit rating levels. As of March 31, ~~2020,~~2021, Devon neither held cash collateral of its counterparties 0r posted cash collateral to its counterparties.

As of March 31, ~~2020,~~2021, 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.

As of March 31, ~~2020,~~2021, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index and the end of month NYMEX index. The second table presents Devon’s natural gas derivatives that settle against the respective indices noted within the table.

As of March 31, ~~2020,~~2021, 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.

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

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

	March 31, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Commodity derivative assets:
Other current assets	$	616	$	49	$	3	$	5
Other long-term assets		27		1		3		1
Total derivative assets	$	643	$	50	$	6	$	6
Commodity derivative liabilities:
Other current liabilities	$	—	$	30	$	667	$	143
Other long-term liabilities		5		1		122		5
Total derivative liabilities	$	5	$	31	$	789	$	148

The table below presents the share-based compensation expense included in Devon’s accompanying consolidated statements of comprehensive earnings. The vesting for certain share-based awards was accelerated in conjunction with the reduction of workforce described in Note 6 and is included in restructuring and transaction costs in the accompanying consolidated statements of comprehensive earnings.

	Three Months Ended March 31st,				Three Months Ended March 31,
	2020		2019		2021		2020
G&A	$	20	$	23	$	20	$	20
Restructuring and transaction costs		—		22		21		—
Total	$	20	$	45	$	41	$	20
Related income tax benefit	$	—	$	9

Under its approved long-term incentive plan, Devon ~~granted~~grants share-based awards to certain ~~employees in the first three months of 2020.~~employees. 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.

						Performance-Based					Performance												Performance-Based					Performance
	Restricted Stock Awards					Restricted Stock Awards					Share Units							Restricted Stock Awards & Units					Restricted Stock Awards					Share Units
	Awards			Weighted Average Grant-Date Fair Value		Awards			Weighted Average Grant-Date Fair Value		Units					Weighted Average Grant-Date Fair Value		Awards/Units			Weighted Average Grant-Date Fair Value		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 12/31/19		4,984		$	29.65		153		$	33.88		2,155				$	40.35
Unvested at 12/31/20																			5,316		$	25.82		44		$	44.70		1,994				$	31.89
Granted(1)		2,865		$	22.54		—		$	—		688				$	27.89		5,542		$	18.71		—		$	—		861				$	18.08
Vested		(1,733	)	$	29.42		(105	)	$	29.12		(455	)			$	52.56		(4,329	)	$	22.63		(39	)	$	45.41		(754	)			$	37.40
Forfeited		(29	)	$	28.05		—		$	—		(304	)			$	52.56		(20	)	$	24.79		—		$	—		(25	)			$	36.04
Unvested at 3/31/20		6,087		$	26.37		48		$	44.12		2,084		⁽¹	⁾	$	31.79
Unvested at 3/31/21																			6,509		$	21.89		5		$	38.54		2,076		⁽²	⁾	$	24.12

The following table presents the assumptions related to the performance share units granted in ~~2020,~~2021, as indicated in the previous summary table.

	2020		2021
Grant-date fair value	$	27.89	$	18.08
Risk-free interest rate	1.36%		0.18%
Volatility factor	38.4%		67.8%
Contractual term (years)	2.89		2.89

The following table presents a summary of the unrecognized compensation cost and the related weighted average recognition period associated with unvested awards and units as of March 31, ~~2020.~~2021.

			Performance-Based						Performance-Based
	Restricted Stock		Restricted Stock		Performance		Restricted Stock		Restricted Stock		Performance
	Awards		Awards		Share Units		Awards/Units		Awards		Share Units
Unrecognized compensation cost	$	120	$	—	$	25	$	88	$	—	$	21
Weighted average period for recognition (years)		2.9		1.2		1.8		2.2		0.2		2.3

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

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

~~Reduced~~Due to the reduced demand from the COVID-19 pandemic ~~caused~~causing an unprecedented downturn in the price of ~~oil. As a result, Devon reduced planned 2020~~oil and reductions in near-term capital investment, ~~by 45%. With materially lower commodity prices and reduced near-term investment, Devon assessed all of its oil and gas fields for impairment as of March 31, 2020.~~ For impairment determinations, Devon historically utilized NYMEX forward 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, 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 of capital to discount the future net cash flows.

Devon recognized approximately $2.7 billion of proved asset impairments during the first ~~three months~~quarter of 2020. These impairments related to the Anadarko Basin and Rockies fields in which the cost basis included acquisitions completed in 2016 and 2015, respectively, when commodity prices were much ~~higher than they are today. In~~higher. During the first quarter of 2020, Devon also recognized $2 million of product line fill impairments.

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 development resulting in unproved impairments of $1 million.~~

~~During the first quarter of 2019, Devon announced workforce reductions~~The following table summarizes Devon’s restructuring and ~~other initiatives designed to enhance its operational focus and cost structure in~~transaction costs.

In conjunction with the ~~portfolio transformation announcement further discussed in~~ ~~Note 2. As a result,~~Merger closing, Devon recognized ~~$51~~$143 million of restructuring expenses during the first ~~three months~~quarter of ~~2019.~~2021 related to employee severance and termination benefits, settlements and curtailments from defined retirement benefits and contract terminations. Of these expenses, ~~$22~~$37 million and $21 million resulted from settlements and curtailments of defined retirement benefits and accelerated vesting of share-based grants, respectively, which are ~~noncash~~non-cash charges. Additionally, in conjunction with the Merger closing, Devon recognized $46 million of transaction costs primarily comprised of bank, legal and accounting fees.

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

	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
Loss from continuing operations before income taxes	$	(2,107	)	$	(497	)	$	(32	)	$	(2,107	)

Current income tax benefit	$	(106	)	$	(4	)	$	(5	)	$	(106	)
Deferred income tax benefit		(311	)		(115	)		(243	)		(311	)
Total income tax benefit	$	(417	)	$	(119	)	$	(248	)	$	(417	)

U.S. statutory income tax rate		21	%		21	%		21	%		21	%
State income taxes		1	%		6	%		(1	%)		1	%
Change in tax legislation		5	%		0	%		0	%		5	%
Unrecognized tax benefits								0	%		0	%
Other		(3	%)		(3	%)		(48	%)		(3	%)
Deferred tax asset valuation allowance		(4	%)		0	%		791	%		(4	%)
Effective income tax rate		20	%		24	%		763	%		20	%

~~Devon estimates its annual effective~~The deferred income tax ~~rate to record its quarterly provision for income taxes~~benefit recognized in the ~~various jurisdictions~~first quarter of 2021 primarily relates to the Merger. As shown in ~~which it operates. Statutory~~Note 2, Devon recognized $254 million of deferred tax ~~rate changes~~liabilities to account for the Merger. The recognition of these deferred tax liabilities caused a decrease to Devon’s net deferred tax assets and ~~other significant or unusual~~a corresponding decrease to the valuation allowance Devon has recognized on its U.S. Federal deferred tax assets.

As of March 31, 2021, Devon continues to maintain a valuation allowance against materially all U.S. deferred tax assets. Devon continues to assess its valuation allowance position every quarter. Absent any additional objective negative evidence, and with the addition of subjective evidence such as forecasted taxable income, Devon may adjust the valuation allowance on its deferred tax assets in future periods.

In the table above, the “other” effect is composed primarily of permanent differences related to costs incurred in connection with the Merger. Such items ~~are recognized as discrete items~~represent $15 million of income tax expense in the first quarter ~~in which they occur.~~of 2021.

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~~recoup previously paid taxes. As a ~~refund.~~result, Devon ~~intends to carry~~is carrying back net operating losses generated in 2020 and 2019 to 2015 and ~~2020 back to~~ 2014, ~~and 2015,~~ respectively. ~~As a result,~~Because the U.S. Federal income tax rate was higher in the carryback periods, Devon ~~recorded a $96 million~~recognized an income tax benefit in ~~Q1 2020, and expects to record an additional $9 million income tax benefit by the end of the year.~~

~~Throughout 2019, Devon maintained a valuation allowance~~ against certain deferred tax assets, including certain tax credits and 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 quarter of 2020 and is now in a net deferred tax asset position. ~~Devon reassessed its position and recorded a 100% valuation allowance against all net deferred tax assets as of March 31, 2020, increasing its valuation allowance by $108 million.~~

~~Included in “other” in the table above is the impact of increasing Devon’s unrecognized tax benefits by approximately $34 million during~~ the first quarter of 2020.

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

	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
Net loss from continuing operations:
Net loss from continuing operations	$	(1,691	)	$	(378	)
Net earnings (loss) from continuing operations:
Net earnings (loss) from continuing operations							$	213		$	(1,691	)
Attributable to participating securities		(1	)		—			(2	)		(1	)
Basic and diluted loss from continuing operations	$	(1,692	)	$	(378	)
Basic and diluted earnings (loss) from continuing operations							$	211		$	(1,692	)
Common shares:
Common shares outstanding - total		383			434			654			383
Attributable to participating securities		(6	)		(6	)		(5	)		(6	)
Common shares outstanding - basic and diluted		377			428
Net loss per share from continuing operations:
Common shares outstanding - basic								649			377
Dilutive effect of potential common shares issuable								2			—
Common shares outstanding - diluted								651			377
Net earnings (loss) per share from continuing operations:
Basic	$	(4.48	)	$	(0.89	)	$	0.33		$	(4.48	)
Diluted	$	(4.48	)	$	(0.89	)	$	0.32		$	(4.48	)
Antidilutive options ⁽¹⁾		—			1
Antidilutive options								—			—

	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
Changes in assets and liabilities, net:
Accounts receivable	$	238		$	(29	)	$	(63	)	$	238
Income tax receivable		(113	)		—			15			(113	)
Other current assets		(38	)		9			(25	)		(38	)
Other long-term assets		(24	)		(8	)		(10	)		(24	)
Accounts payable		42			(51	)		71			42
Revenues and royalties payable		(113	)		46			(55	)		(113	)
Other current liabilities		(81	)		(23	)		(33	)		(81	)
Other long-term liabilities		33			(5	)		(27	)		33
Total	$	(56	)	$	(61	)	$	(127	)	$	(56	)
Supplementary cash flow data - total operations:
Interest paid (net of capitalized interest)	$	64		$	53
Income taxes paid	$	151		$	6
Interest paid							$	114		$	64
Income taxes paid (refunded)							$	(6	)	$	151

As of March 31, 2021, Devon had approximately $230 million of accrued capital expenditures included in total property and equipment, net and accounts payable on the consolidated balance sheets. As of December 31, 2020 (pre-merger), Devon had approximately $100 million of accrued capital expenditures in total property and equipment, net and accounts payable on the consolidated balance sheets. As of January 7, 2021 (date of Merger closing), Devon assumed approximately $150 million of accrued capital expenditures included in accounts payable.

	March 31, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Oil, gas and NGL sales	$	235		$	452		$	742		$	335
Joint interest billings		147			168			127			57
Marketing and midstream revenues		149			207			181			195
Other		74			13			54			25
Gross accounts receivable		605			840			1,104			612
Allowance for doubtful accounts		(11	)		(8	)		(15	)		(11	)
Net accounts receivable	$	594		$	832		$	1,089		$	601

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			March 31, 2021			December 31, 2020
Property and equipment:
Proved	$	27,986		$	27,668		$	35,119		$	27,589
Unproved and properties under development		504			583			2,692			392
Total oil and gas		28,490			28,251			37,811			27,981
Less accumulated DD&A		(23,734	)		(20,693	)		(23,985	)		(23,545	)
Oil and gas property and equipment, net		4,756			7,558			13,826			4,436
Other property and equipment		1,732			1,725			2,060			1,737
Less accumulated DD&A		(708	)		(690	)		(612	)		(780	)
Other property and equipment, net ⁽¹⁾		1,024			1,035			1,448			957
Property and equipment, net	$	5,780		$	8,593		$	15,274		$	5,393

During the first quarter of 2020, Devon recognized asset impairments of $2.7 billion primarily related to proved oil and gas assets and $110 million of unproved impairments, which significantly reduced the carrying value of its property and equipment, net. See ~~Note 5~~ ~~for additional details.~~

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

	March 31, 2020			December 31, 2019			March 31, 2021			December 31, 2020

8.25% due August 1, 2023 ⁽¹⁾							$	242		$	—
5.25% due September 15, 2024 ⁽¹⁾								472			—
5.85% due December 15, 2025	$	485		$	485			485			485
5.75% due June 1, 2026 ⁽¹⁾								500			—
7.50% due September 15, 2027		73			73			73			73
5.25% due October 15, 2027 ⁽¹⁾								600			—
5.875% due June 15, 2028 ⁽¹⁾								325			—
4.50% due January 15, 2030 ⁽¹⁾								585			—
7.875% due September 30, 2031		675			675			675			675
7.95% due April 15, 2032		366			366			366			366
5.60% due July 15, 2041		1,250			1,250			1,250			1,250
4.75% due May 15, 2042		750			750			750			750
5.00% due June 15, 2045		750			750			750			750
Net discount on debentures and notes		(20	)		(20	)
Net premium (discount) on debentures and notes								226			(20	)
Debt issuance costs		(34	)		(35	)		(31	)		(31	)
Total debt							$	7,268		$	4,298
Less amount classified as short-term debt								226			—
Total long-term debt	$	4,295		$	4,294		$	7,042		$	4,298

The following schedule includes the summary of the WPX debt Devon assumed upon closing of the Merger on January 7, 2021.

Devon has a $3.0 billion Senior Credit Facility. As of March 31, ~~2020,~~2021, Devon had 0 outstanding borrowings under the Senior Credit Facility and had issued $2 million in outstanding letters of credit under this facility. The Senior Credit Facility contains only one material financial covenant. This covenant requires Devon’s ratio of total funded debt to total capitalization, as defined in the credit agreement, to be no greater than 65%. Under the terms of the credit agreement, total capitalization is adjusted to add back ~~noncash~~non-

cash financial write-downs such as impairments. As of March 31, ~~2020,~~2021, Devon was in compliance with this covenant with a debt-to-capitalization ratio of ~~18.8%~~27.4%.

In ~~January 2019,~~first quarter of 2021, Devon ~~repaid the $162~~redeemed $43 million of ~~6.30%~~the 6.00% senior notes ~~at maturity.~~due 2022, $175 million of the 5.875% senior notes due 2028 and $315 million of the 4.50% senior notes due 2030. In the first quarter of 2021, Devon recognized a $20 million gain on early retirement of debt, consisting of $47 million of non-cash premium accelerations partially offset by $27 million of cash retirement costs. The gain on early retirement is included in net financing costs in the consolidated comprehensive statements of earnings. Devon also redeemed $210 million of the 5.25% senior notes due 2027 in April 2021. In May 2021, Devon gave notice to exercise its early redemption to fully retire the 5.75% senior notes due 2026 in June 2021.

	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
Interest based on debt outstanding	$	65		$	65		$	105		$	65
Gain on early retirement of debt								(20	)		—
Interest income		(5	)		(11	)		(1	)		(5	)
Other		5			6			(7	)		5
Total net financing costs	$	65		$	60		$	77		$	65

The following table presents Devon’s right-of-use assets and lease liabilities as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

	March 31, 2020						December 31, 2019						March 31, 2021						December 31, 2020
	Finance		Operating		Total		Finance		Operating		Total		Finance		Operating		Total		Finance		Operating		Total
Right-of-use assets	$	227	$	10	$	237	$	229	$	14	$	243	$	217	$	38	$	255	$	220	$	3	$	223
Lease liabilities:
Current lease liabilities ⁽¹⁾	$	7	$	7	$	14	$	7	$	10	$	17	$	8	$	23	$	31	$	8	$	1	$	9
Long-term lease liabilities		242		3		245		240		4		244		244		16		260		244		2		246
Total lease liabilities	$	249	$	10	$	259	$	247	$	14	$	261	$	252	$	39	$	291	$	252	$	3	$	255

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.

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

	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
Asset retirement obligations as of beginning of period	$	398		$	484		$	369		$	398
Assumed WPX obligations								98			—
Liabilities incurred		6			4			9			6
Liabilities settled and divested		(13	)		(33	)		(17	)		(13	)
Revision of estimated obligation		4			(62	)		11			4
Accretion expense on discounted obligation		5			6			7			5
Asset retirement obligations as of end of period		400			399			477			400
Less current portion		14			15			22			14
Asset retirement obligations, long-term	$	386		$	384		$	455		$	386

~~During the first three months of 2019, Devon reduced its asset retirement obligations by $62 million,~~ primarily due to changes in the future cost estimates and retirement dates for its oil and gas assets. Additionally, during the first three months of 2019, Devon reduced its asset retirement obligations by $29 million as a result of the non-core asset divestitures. For additional information, see ~~Note 2~~.

In March 2018, Devon 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 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 thousands).~~

Devon 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, Devon announced a 22% increase to its quarterly dividend, to $0.11 per

~~share, beginning~~Components of other long-term liabilities include the following:

Devon assumed fixed gathering, processing and transportation contracts in the ~~second~~Merger and recognized a liability related to the difference in the contractual and market rates of these contracts as of the date of the Merger. The terms of the contracts extendthrough 2038and all relate to the Delaware Basin. This difference will be recognized as a reduction to production expenses as the associated reserves are produced over the life of the respective contracts. In the first quarter of ~~2020. In~~2021, Devon recognized $8 million of non-cash amortization of these liabilities as a reduction of production expenses in the ~~second quarter~~consolidated statement of ~~2019,~~comprehensive earnings.

Additionally, in the Merger, Devon ~~raised its quarterly dividend from $0.08~~assumed a future obligation under a performance guarantee related to ~~$0.09 per share.~~gathering and processing commitments for assets WPX sold in 2018 in which the purchaser of those assets is now not expected to have the financial ability to satisfy the obligations. As of March 31, 2021, Devon has recorded a $164 million liability for the estimated potential exposure based on probability-weighted cash flows for the remainder of the contract term of five years. Of the $164 million, $128 million is included in other long-term liabilities and $36 million is included in other current liabilities on the consolidated balance sheets as of March 31, 2021.

On January 7, 2021, Devon and WPX completed an all-stock merger of equals. On the closing date of the Merger, each share of WPX common stock was automatically converted into the right to receive0.5165 of a share of Devon common stock. Consequently, Devon issued approximately 290 million shares of Devon common stock to holders of WPX common stock to effect the Merger on January 7, 2021.

The table below provides information regarding purchases of Devon’s common stock that were made in 2020 under a share repurchase program that expired at the end of 2020 (shares in thousands).

Upon completion of the Merger, Devon continued its commitment to pay a quarterly dividend at a fixed rate and instituted a variable quarterly dividend, which is dependent on quarterly cash flows, among other factors. The following table summarizes Devon’s fixed and variable dividends for the first quarter of 2021 and 2020, respectively.

In May 2021, Devon announced a cash dividend in the amount of $0.34 per share payable in the second quarter of 2021. The dividend consists of a fixed quarterly dividend in the amount of approximately $74 million (or $0.11 per share) and a variable quarterly dividend in the amount of approximately $155 million (or $0.23 per share).

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

~~In 2019,~~ On October 1, 2020, Devon ~~announced that it had entered into an agreement to sell~~completed the sale of its Barnett Shale assets to BKV ~~and 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~~proceeds, net of purchase price adjustments, ~~at closing, which was extended to December 31, 2020.~~of $490 million. Additionally, the agreement provides for contingent earnout payments to Devon of up to $260 million based upon future commodity prices, with upside participation beginning at a $2.75 Henry Hub natural gas price or a $50 WTI oil price. The contingent payment period ~~commences~~commenced 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 within other current assets in the March 31, ~~2020 Barnett Shale impairment computation~~2021 balance sheet was ~~$41~~$66 million. The value was derived utilizing a Monte Carlo valuation model and qualifies as a level 3 fair value measurement.

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

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 2019, Devon utilized a portion of the sales proceeds to~~ 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 cash retirement costs and $6 million of 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.

~~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

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

Numerous oil and natural gas producers and related parties, including Devon, have been named in various lawsuits alleging royalty underpayments. Devon is currently ~~named as a defendant in~~defending against a number of such lawsuits, ~~including~~either as a named defendant in the action or pursuant to indemnity obligations for the benefit of a third party. Plaintiffs in some of these lawsuits ~~in which the plaintiffs seek to certify classes of similarly situated plaintiffs.~~are seeking class certification. Among the allegations typically asserted in these suits are claims that Devon used below-market prices, made improper deductions, failed to “enhance” the value of gas through processing, used improper measurement techniques, ~~and~~ entered into ~~gas~~ purchase and ~~processing~~midstream arrangements with affiliates that resulted in underpayment of royalties ~~in connection with~~or otherwise failed to prudently market oil, natural gas and NGLs produced and ~~sold.~~sold and pay royalties on the highest obtainable price. 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.

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

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

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

Direct and indirect purchasers of natural gas in various states filed individual and class action lawsuits against The Williams Companies, Inc. (“Williams”) and other parties alleging the manipulation of published gas price indices and seeking unspecified amounts of damages. WPX and certain of its subsidiaries, which were then affiliates of Williams, were also named as defendants in these actions. Such actions were transferred to the Nevada federal district court for consolidation of discovery and pre-trial issues. Although certain of the actions were subsequently settled or otherwise resolved, two putative class actions and an individual action remain unresolved.

23The putative class actions have been remanded to their originally filed court, the Wisconsin federal district court, and class certification motions are pending. The individual action, Reorganized FLI Inc., has been remanded to its originally filed court, the

Kansas federal district court. The Tenth Circuit granted a petition to reconsider the denial of defendants’ motion for summary judgment, and the decision is pending after oral argument in January 2021.

Because of the uncertainty around pending unresolved issues, including an insufficient description of the purported classes and other related matters, Devon cannot reasonably estimate a range of potential exposure at this time for these matters. In connection with its spin-off from Williams in 2011, WPX entered into a separation and distribution agreement with Williams, pursuant to which Williams agreed to indemnify and hold WPX and its subsidiaries harmless from any losses arising out of these matters.

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

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

The following table provides carrying value and fair value measurement information for certain of Devon’s financial assets and liabilities. The carrying values of cash, ~~cash restricted for discontinued operations,~~ accounts receivable, other current receivables, accounts payable, other current payables, accrued expenses and lease liabilities included in the accompanying consolidated balance sheets approximated fair value at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, as applicable. Therefore, such financial assets and liabilities are not presented in the following table. Additionally, information regarding the fair values of oil and gas assets is provided in Note 5.

							Fair Value Measurements Using:											Fair Value Measurements Using:
	Carrying			Total Fair			Level 1		Level 2			Carrying			Total Fair			Level 1		Level 2			Level 3
	Amount			Value			Inputs		Inputs			Amount			Value			Inputs		Inputs			Inputs
March 31, 2020 assets (liabilities):
March 31, 2021 assets (liabilities):
Cash equivalents	$	890		$	890		$	890	$	—		$	1,075		$	1,075		$	1,075	$	—		$	—
Commodity derivatives	$	643		$	643		$	—	$	643		$	6		$	6		$	—	$	6		$	—
Commodity derivatives	$	(5	)	$	(5	)	$	—	$	(5	)	$	(789	)	$	(789	)	$	—	$	(789	)	$	—
Debt	$	(4,295	)	$	(3,118	)	$	—	$	(3,118	)	$	(7,268	)	$	(8,091	)	$	—	$	(8,091	)	$	—
December 31, 2019 assets (liabilities):
Contingent earnout payments												$	70		$	70		$	—	$	—		$	70
December 31, 2020 assets (liabilities):
Cash equivalents	$	702		$	702		$	702	$	—		$	1,436		$	1,436		$	1,436	$	—		$	—
Commodity derivatives	$	50		$	50		$	—	$	50		$	6		$	6		$	—	$	6		$	—
Commodity derivatives	$	(31	)	$	(31	)	$	—	$	(31	)	$	(148	)	$	(148	)	$	—	$	(148	)	$	—
Debt	$	(4,294	)	$	(5,376	)	$	—	$	(5,376	)	$	(4,298	)	$	(5,365	)	$	—	$	(5,365	)	$	—
Contingent earnout payments												$	66		$	66		$	—	$	—		$	66

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

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

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

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

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

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

The following discussion and analysis addresses material changes in our results of operations for the three-month period ended March 31, ~~2020~~2021 compared to previous periods and in our financial condition and liquidity since December 31, ~~2019.~~2020. For information regarding our critical accounting policies and estimates, see our ~~2019~~2020 Annual Report on Form 10-K under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

A novel strain of 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.~~March 2020. The COVID-19 team ishas remained focused on two key priorities: the health and safety of our employees and contractors and the uninterrupted operation of our business. For additional information regarding our actions in response to the COVID-19 pandemic, see our 2020 Annual Report on Form 10-K under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

On September 26, 2020, we entered into the Merger Agreement, providing for an all-stock merger of equals with WPX which successfully closed on January 7, 2021. The Merger has created a leading unconventional oil producer in the U.S., with an asset base underpinned by premium acreage in the economic core of the Delaware Basin. This strategic combination accelerates our transition to a cash-return business model, including the implementation of a fixed plus variable dividend strategy. We remain focused on building economic value by executing on our strategic priorities of disciplined oil volume growth while capturing operational and corporate synergies, reducing reinvestment rates to maximize free cash flow, maintaining low leverage, delivering cash returns to our shareholders and pursuing ESG excellence. Our recent performance highlights for these priorities include the following items:

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:~~

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

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~~non-cash adjustments to the value of our commodity hedges. Net earnings in the first quarter of 2021, the fourth quarter of 2020, the third quarter of 2020 and the second quarter of 2020 each included a hedge valuation loss, net of tax of $0.2 billion, $0.1 billion, $0.1 billion and $0.5 billion, respectively. Net earnings in the first quarter of 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 ~~continue to be~~have been challenged by commodity prices and deterioration of the macro-economic environment resulting from the unprecedented COVID-19 ~~pandemic.~~pandemic over the past year; however, prices began to recover in the second half of 2020 and have significantly increased in the first quarter of 2021. Our earnings ~~declined~~increased from the fourth quarter of ~~2019~~2020 to the first quarter of ~~2020~~2021 due to ~~a decrease~~an increase in overall commodity ~~prices.~~prices as well as higher volumes resulting from the Merger. Led by a ~~19% decrease~~36% increase in ~~the~~ WTI from the fourth quarter of ~~2019~~2020 to the first quarter of ~~2020,~~2021, our unhedged combined realized price ~~dropped 23%~~rose 55%. ~~Despite these price drops, we~~These increases were ~~able~~partially offset by impacts related to ~~maintain production volumes while simultaneously reducing production and administrative costs 4% compared to 2019.~~the February 2021 winter storm which reduced first quarter volumes.

Like earnings, our operating cash flow is sensitive to volatile commodity prices. EBITDAX, which excludes financial amounts related to discontinued operations, ~~has~~and operating cash flows have been ~~more stable over~~impacted by the ~~past five quarters as our production growth~~COVID-19 pandemic and ~~cost reductions~~

~~countered price declines experienced over the same time period. Regardless of~~its impact on commodity prices. Our cash flow ~~fluctuations, we remain focused on managing our capital investment~~increased during the first quarter of 2021 primarily due to ~~generate free cash flow. As operating cash flow has declined, we have adjusted our capital development plans accordingly.~~higher commodity prices and the positive effects of the Merger.

We exited the first quarter of ~~2020~~2021 with ~~$4.7~~$4.9 billion of liquidity, comprised of ~~$1.7~~$1.9 billion of cash ~~inclusive of $200 million of cash restricted for discontinued operations,~~ and $3.0 billion of available credit under our Senior Credit Facility. We currently have ~~$4.3~~$7.0 billion of debt outstanding with no maturities until the ~~end~~latter half of ~~2025.~~

2023. We currently have approximately ~~90%~~50% and 60% of our ~~expected~~2021 oil ~~production~~ and ~~approximately 45% of our expected~~ gas production ~~protected with hedges for the remainder of 2020.~~hedged, respectively. These contracts consist of collars and swaps based off the WTI oil benchmark and the Henry Hub and NYMEX last day natural gas ~~index.~~indices. Additionally, we have entered into regional basis swaps in an effort to protect price realizations across our portfolio.

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.~~

Our first quarter ~~2020~~2021 net earnings were $216 million, compared to a net loss ~~from continuing operations was $1.7 billion.~~of $73 million for the fourth quarter of 2020. The graph below shows the change in the net earnings (loss) from the fourth quarter of ~~2019~~2020 to the first quarter of ~~2020.~~2021. 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
%

~~Continued development~~Production Volumes

	Q1 2021		% of Total			Q4 2020		Change
Oil (MBbls/d)
Delaware Basin		172		64	%		99		+73	%
Anadarko Basin		13		5	%		16		- 22	%
Williston Basin		44		17	%		—	N/M
Eagle Ford		16		6	%		18		- 10	%
Powder River Basin		17		6	%		16		+6	%
Other		6		2	%		7		- 15	%
Total		268		100	%		156		+71	%

	Q1 2021		% of Total			Q4 2020		Change
Gas (MMcf/d)
Delaware Basin		471		60	%		267		+77	%
Anadarko Basin		200		25	%		233		- 14	%
Williston Basin		49		6	%		—	N/M
Eagle Ford		47		6	%		60		- 21	%
Powder River Basin		21		3	%		22		- 4	%
Other		3		0	%		2		+37	%
Total		791		100	%		584		+35	%

	Q1 2021		% of Total			Q4 2020		Change
NGLs (MBbls/d)
Delaware Basin		60		61	%		43		+41	%
Anadarko Basin		21		21	%		25		- 16	%
Williston Basin		8		8	%		—	N/M
Eagle Ford		6		6	%		9		- 31	%
Powder River Basin		3		3	%		3		+6	%
Other		1		1	%		—	N/M
Total		99		100	%		80		+24	%

	Q1 2021		% of Total			Q4 2020		Change
Combined (MBoe/d)
Delaware Basin		310		62	%		186		+67	%
Anadarko Basin		68		14	%		81		- 16	%
Williston Basin		61		12	%		—	N/M
Eagle Ford		30		6	%		37		- 18	%
Powder River Basin		23		5	%		22		+4	%
Other		7		1	%		7		-4	%
Total		499		100	%		333		+50	%

From the fourth quarter of 2020 to the first quarter of 2021, the change in volumes contributed to a $445 million increase in earnings. Due to the Merger closing on January 7, 2021, volumes now include WPX legacy assets in the Delaware Basin in Texas and ~~Powder River~~New Mexico and the Williston Basin ~~drove production increases. Additionally, a well-control event curtailed production volumes~~in North Dakota. Volumes associated with these WPX legacy assets were approximately 200 MBoe/d in the ~~Eagle Ford during the fourth~~first quarter of ~~2019. These~~2021. The increase in volumes associated with the Merger were partially offset by ~~lower activity in~~impacts of 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 decreaseFebruary 2021 winter storm. Volumes in the second quarter ~~of 2020~~are expected to a range ~~of 302~~from approximately 538 to ~~328~~561 MBoe/~~d and continue to decrease for the second half of 2020.~~d.

Field Prices

	Q1 2020		Realization		Q4 2019		Change			Q1 2021			Realization	Q4 2020			Change
Oil (per Bbl)
WTI index	$	46.44			$	57.02		- 19	%	$	57.87			$	42.65			+36	%
Realized price, unhedged	$	44.59		96%	$	55.41		- 20	%	$	56.36		97%	$	39.84			+41	%
Cash settlements	$	5.14			$	1.48				$	(9.13	)		$	(1.83	)
Realized price, with hedges	$	49.73		107%	$	56.89		- 13	%	$	47.23		82%	$	38.01			+24	%

	Q1 2020		Realization		Q4 2019		Change			Q1 2021			Realization	Q4 2020		Change
Gas (per Mcf)
Henry Hub index	$	1.95			$	2.50		- 22	%	$	2.71			$	2.67		+1	%
Realized price, unhedged	$	1.21		62%	$	1.70		- 29	%	$	2.91		107%	$	1.96		+48	%
Cash settlements	$	0.36			$	0.13				$	(0.15	)		$	—
Realized price, with hedges	$	1.57		81%	$	1.83		- 14	%	$	2.76		102%	$	1.96		+41	%

	Q1 2020		Realization		Q4 2019		Change			Q1 2021			Realization	Q4 2020			Change
NGLs (per Bbl)
Mont Belvieu blended index ⁽¹⁾	$	14.39			$	18.69		- 23	%	$	25.81			$	20.01			+29	%
Realized price, unhedged	$	10.40		72%	$	15.79		- 34	%	$	25.01		97%	$	14.77			+69	%
Cash settlements	$	0.61			$	1.75				$	(0.20	)		$	(0.01	)
Realized price, with hedges	$	11.01		77%	$	17.54		- 37	%	$	24.81		96%	$	14.76			+68	%

	Q1 2020		Q4 2019		Change			Q1 2021			Q4 2020			Change
Combined (per Boe)
Realized price, unhedged	$	25.43	$	32.82		- 23	%	$	39.84		$	25.63			+55	%
Cash settlements	$	3.20	$	1.32				$	(5.17	)	$	(0.86	)
Realized price, with hedges	$	28.63	$	34.14		- 16	%	$	34.67		$	24.77			+40	%

From the fourth quarter of ~~2019~~2020 to the first quarter of ~~2020,~~2021, field prices contributed to a ~~$227~~$557 million ~~decrease~~increase in earnings. Unhedged realized oil, gas and NGL prices ~~decreased~~increased primarily due to ~~lower~~higher WTI, Henry Hub and Mont Belvieu index prices. ~~These decreases were~~The increase in index prices was partially offset by ~~favorable~~a decrease in hedge cash settlements ~~across each of our~~related to all 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.~~ We currently have approximately ~~90%~~50% of our ~~remaining 2020~~2021 oil production hedged with an average floor price of ~~$42/~~$40/Bbl and approximately ~~45%~~60% of our ~~remaining 2020~~2021 gas production hedged with an average floor price of ~~$2.15/~~$2.56/Mcf. ~~Additionally, we~~We are ~~currently building~~continuing to build our 2021 and 2022 hedge positions at market prices.

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

Production Expenses

	Q1 2021			Q4 2020			Change
LOE	$	199		$	91			+119	%
Gathering, processing & transportation		160			130			+23	%
Production taxes		117			47			+149	%
Property taxes		13			3			+333	%
Total	$	489		$	271			+80	%
Per Boe:
LOE	$	4.44		$	2.97			+49	%
Gathering, processing & transportation	$	3.57		$	4.23			- 16	%
Percent of oil, gas and NGL sales:
Production taxes		6.5	%		6.1	%		+8	%

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~~expenses increased from the fourth quarter of 2020 to the ~~current macro-economic environment, reduced planned 2020 capital expenditures and shutting in certain marginal wells, we anticipate decreases in LOE and~~first quarter of 2021 primarily due to the Merger closing on January 7, 2021. Partially offsetting increases to gathering, processing and transportation costs were approximately $20 million of ~~approximately 10% during~~Anadarko volume commitments which expired at the ~~remainder~~end of 2020. ~~Additionally, we expect lower production~~LOE per Boe increased due to a different post-Merger asset mix as well as impacts from the February 2021 winter storm. Production taxes ~~as a result of lower oil, gas and NGL revenues.~~also increased due to the rise in commodity prices.

Field-Level Cash Margin

The table below presents the field-level cash margin for each of our operating areas. Field-level cash margin is computed as oil, gas and NGL ~~revenues~~sales 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		Q1 2021		$ per BOE		Q4 2020		$ per BOE
Field-level cash margin (non-GAAP)
Delaware Basin	$	260	$	17.72	$	372	$	26.30	$	895	$	32.07	$	344	$	20.08
Anadarko Basin		74	$	8.22		147	$	15.06		85	$	14.01		61	$	8.28
Williston Basin										161	$	29.70		—	N/M
Eagle Ford										72	$	26.57		58	$	17.13
Powder River Basin		54	$	20.48		73	$	28.86		67	$	31.99		38	$	18.69
Eagle Ford		87	$	19.20		98	$	23.72
Other		14	$	15.55		21	$	22.33		19	$	28.21		13	$	18.35
Total	$	489	$	15.41	$	711	$	22.55	$	1,299	$	28.95	$	514	$	16.77

DD&A and Asset Impairments

	Q1 2020		Q4 2019		Change			Q1 2021		Q4 2020		Change
Oil and gas per Boe	$	11.90	$	11.71		+2	%	$	9.78	$	9.04		+8	%

Oil and gas	$	377	$	370		+2	%	$	439	$	278		+58	%
Other property and equipment		24		12		+93	%		28		23		+20	%
Total	$	401	$	382		+5	%	$	467	$	301		+55	%

Asset impairments	$	2,666	$	—	N/M			$	—	$	27	N/M

~~Asset impairments were $2.7 billion~~DD&A increased in the first quarter of ~~2020~~2021 primarily due to ~~significant decreases in commodity 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~~Merger closing on our oil, gas and NGL derivative instruments in each reporting period. The changes in fair value resulted from new positions and settlements that occurred during each period, as well as the relationship between contract prices and the associated forward curves.January 7, 2021. For additional information, see Note 32 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

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.

~~Production Volumes~~

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
%

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 quarter of 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
%

	Q1 2021			Q4 2020			Change in earnings
Commodity hedge valuation changes ⁽¹⁾	$	(296	)	$	(90	)	$	(206	)
Marketing and midstream operations		(21	)		(7	)		(14	)
Exploration expenses		3			4			1
Asset dispositions		(32	)		(1	)		31
Net financing costs		77			70			(7	)
Restructuring and transaction costs		189			17			(172	)
Other, net		(29	)		1			30
							$	(337	)

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

~~Production Expenses~~

Q1 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
%

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

~~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

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

~~DD&A and Asset Impairments~~

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 continued development in the 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 additional information, see ~~Note 5~~ ~~in “Part I. Financial Information – Item 1. Financial Statements” in 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~~oil, gas and NGL derivatives on the consolidated statements of comprehensive earnings.

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

~~Marketing operations decreased approximately $33~~Net financing costs increased as a result of WPX debt assumed in the Merger, partially offset by a $20 million ~~primarily from downstream product inventory impairments of $17 million recognized~~gain associated with our debt retirements in the first quarter of ~~2020.~~2021. For additional information, see Note 13 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

~~Exploration~~Restructuring and transaction costs reflect workforce reductions in conjunction with the Merger, as well as various transaction costs related to the Merger. For additional information, see Note 6 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Our first quarter 2021 net earnings was $216 million, compared to a net loss of $1.7 billion for the first quarter of 2020. The graph below shows the change in the net earnings (loss) from the first quarter of 2020 to the first quarter of 2021. The material changes are further discussed by category on the following pages.

Production Volumes

	Q1 2021		% of Total			Q1 2020		Change
Oil (MBbls/d)
Delaware Basin		172		64	%		84		+105	%
Anadarko Basin		13		5	%		24		- 45	%
Williston Basin		44		17	%		—	N/M
Eagle Ford		16		6	%		26		- 39	%
Powder River Basin		17		6	%		21		- 22	%
Other		6		2	%		8		- 27	%
Total		268		100	%		163		+64	%

	Q1 2021		% of Total			Q1 2020		Change
Gas (MMcf/d)
Delaware Basin		471		60	%		244		+93	%
Anadarko Basin		200		25	%		272		- 26	%
Williston Basin		49		6	%		—	N/M
Eagle Ford		47		6	%		86		- 45	%
Powder River Basin		21		3	%		29		- 27	%
Other		3		0	%		3		- 26	%
Total		791		100	%		634		+25	%

	Q1 2021		% of Total			Q1 2020		Change
NGLs (MBbls/d)
Delaware Basin		60		61	%		37		+61	%
Anadarko Basin		21		21	%		30		- 28	%
Williston Basin		8		8	%		—	N/M
Eagle Ford		6		6	%		9		- 30	%
Powder River Basin		3		3	%		3		+1	%
Other		1		1	%		1		- 8	%
Total		99		100	%		80		+24	%

	Q1 2021		% of Total			Q1 2020		Change
Combined (MBoe/d)
Delaware Basin		310		62	%		162		+92	%
Anadarko Basin		68		14	%		98		- 31	%
Williston Basin		61		12	%		—	N/M
Eagle Ford		30		6	%		50		- 39	%
Powder River Basin		23		5	%		29		- 20	%
Other		7		1	%		9		- 17	%
Total		499		100	%		348		+43	%

From the first quarter of 2020 to the first quarter of 2021, the change in volumes contributed to a $446 million increase in earnings. Due to the Merger closing on January 7, 2021, volumes now include WPX legacy assets in the Delaware Basin in Texas and New Mexico and the Williston Basin in North Dakota. Volumes associated with these WPX legacy assets were approximately 200 MBoe/d in the first quarter of 2021. Continued development of Devon legacy assets in the Delaware Basin also increased volumes. These increases were partially offset by impacts of the February 2021 winter storm and reduced activity across Devon’s remaining assets.

Field Prices

	Q1 2021			Realization	Q1 2020		Change
Oil (per Bbl)
WTI index	$	57.87			$	46.44		+25	%
Realized price, unhedged	$	56.36		97%	$	44.59		+26	%
Cash settlements	$	(9.13	)		$	5.14
Realized price, with hedges	$	47.23		82%	$	49.73		- 5	%

	Q1 2021			Realization	Q1 2020		Change
Gas (per Mcf)
Henry Hub index	$	2.71			$	1.95		+39	%
Realized price, unhedged	$	2.91		107%	$	1.21		+141	%
Cash settlements	$	(0.15	)		$	0.36
Realized price, with hedges	$	2.76		102%	$	1.57		+76	%

	Q1 2021			Realization	Q1 2020		Change
NGLs (per Bbl)
Mont Belvieu blended index ⁽¹⁾	$	25.81			$	14.39		+79	%
Realized price, unhedged	$	25.01		97%	$	10.40		+140	%
Cash settlements	$	(0.20	)		$	0.61
Realized price, with hedges	$	24.81		96%	$	11.01		+125	%

(1)

Based upon composition of our NGL barrel.

	Q1 2021			Q1 2020		Change
Combined (per Boe)
Realized price, unhedged	$	39.84		$	25.43		+57	%
Cash settlements	$	(5.17	)	$	3.20
Realized price, with hedges	$	34.67		$	28.63		+21	%

From the first quarter of 2020 to the first quarter of 2021, field prices contributed to a $535 million increase in earnings. Unhedged realized oil, gas and NGL prices increased primarily due to higher WTI, Henry Hub and Mont Belvieu index prices. The increase in index prices was partially offset by a decrease in hedge cash settlements related to all products.

Hedge Settlements

	Q1 2021			Q1 2020		Change
	Q
Oil	$	(220	)	$	76		- 389	%
Natural gas		(10	)		21		- 148	%
NGL		(2	)		4		- 150	%
Total cash settlements ⁽¹⁾	$	(232	)	$	101		- 330	%

(1)

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

Production Expenses

	Q1 2021			Q1 2020			Change
LOE	$	199		$	126			+58	%
Gathering, processing & transportation		160			130			+23	%
Production taxes		117			56			+109	%
Property taxes		13			6			+117	%
Total	$	489		$	318			+54	%
Per Boe:
LOE	$	4.44		$	3.96			+12	%
Gathering, processing & transportation	$	3.57		$	4.11			- 13	%
Percent of oil, gas and NGL sales:
Production taxes		6.5	%		6.9	%		- 5	%

Production expenses increased from the first quarter of 2020 to the first quarter of 2021 primarily due to the Merger closing on January 7, 2021. Partially offsetting increases to gathering, processing and transportation costs were approximately $10 million of Anadarko volume commitments which expired at the end of 2020. Production taxes also increased due to the rise in commodity prices.

Field-Level Cash Margin

The table below presents the field-level cash margin for each of our operating areas. Field-level cash margin is computed as oil, gas and NGL sales less production expenses and is not 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 2021		$ per BOE		Q1 2020		$ per BOE
Field-level cash margin (non-GAAP)
Delaware Basin	$	895	$	32.07	$	260	$	17.72
Anadarko Basin		85	$	14.01		74	$	8.22
Williston Basin		161	$	29.70		—	N/M
Eagle Ford		72	$	26.57		87	$	19.20
Powder River Basin		67	$	31.99		54	$	20.48
Other		19	$	28.21		14	$	15.55
Total	$	1,299	$	28.95	$	489	$	15.41

DD&A and Asset Impairments

	Q1 2021		Q1 2020		Change
Oil and gas per Boe	$	9.78	$	11.90		- 18	%

Oil and gas	$	439	$	377		+16	%
Other property and equipment		28		24		+18	%
Total	$	467	$	401		+16	%

Asset impairments	$	—	$	2,666	N/M

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

Asset impairments were $2.7 billion in the first quarter of 2020 due to ~~$110 million~~significant decreases in ~~unproved asset impairments.~~commodity prices resulting primarily from the COVID-19 pandemic. These impairments resulted in lower DD&A rates which decreased DD&A in 2021 compared to 2020. For additional information, see Note 5 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Other Items

	Q1 2021			Q1 2020			Change in earnings
Commodity hedge valuation changes ⁽¹⁾	$	(296	)	$	619		$	(915	)
Marketing and midstream operations		(21	)		(18	)		(3	)
Exploration expenses		3			112			109
Asset dispositions		(32	)		—			32
Net financing costs		77			65			(12	)
Restructuring and transaction costs		189			—			(189	)
Other, net		(29	)		(48	)		(19	)
							$	(997	)

(1)

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

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

Restructuring and transaction costs reflect workforce reductions in conjunction with the Merger, as well as various transaction costs related to the Merger. For additional information, see Note 6 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Income Taxes

	Q1 2020			Q1 2019			Q1 2021			Q1 2020
Current benefit	$	(106	)	$	(4	)	$	(5	)	$	(106	)
Deferred benefit		(311	)		(115	)		(243	)		(311	)
Total benefit	$	(417	)	$	(119	)	$	(248	)	$	(417	)
Effective income tax rate		20	%		24	%		763	%		20	%

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

~~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.~~

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.

~~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.

The following table presents the major changes in cash and cash equivalents for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

	Three Months Ended March 31st,						Three Months Ended March 31,
	2020			2019			2021			2020
Operating cash flow from continuing operations	$	529		$	437		$	592		$	529
WPX acquired cash								344			—
Divestitures of property and equipment		25			310			15			25
Capital expenditures		(425	)		(490	)		(499	)		(425	)
Acquisitions of property and equipment		(4	)		(10	)
Debt activity, net		—			(162	)		(560	)		—
Repurchases of common stock		(38	)		(999	)		—			(38	)
Common stock dividends		(34	)		(34	)		(203	)		(34	)
Contributions from noncontrolling interests		5			—
Distributions to noncontrolling interests		(3	)		—
Noncontrolling interest activity, net								(28	)		2
Other		(17	)		(19	)		(20	)		(21	)
Net change in cash, cash equivalents and restricted cash from discontinued operations		(155	)		(124	)		—			(155	)
Net change in cash, cash equivalents and restricted cash	$	(117	)	$	(1,091	)	$	(359	)	$	(117	)
Cash, cash equivalents and restricted cash at end of period	$	1,727		$	1,355		$	1,878		$	1,727

As presented in the table above, net cash provided by operating activities continued to be a significant source of capital and liquidity. ~~During~~Operating cash flow grew 12% during the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase was due to the Merger and prices significantly increasing in the first quarter of 2021. Despite our portfolio enhancements, aggressive cost reductions and operational advancements, our 2020 ~~our operating cash flow funded all our capital expenditures~~financial results were challenged by commodity prices and ~~dividends, allowing us to use available cash balances to fund other capital uses.~~deterioration of the macro-economic environment resulting from the unprecedented COVID-19 pandemic.

During the first three months of ~~2019,~~2021, we sold non-core U.S. assets for approximately ~~$300~~$15 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.

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,				Three Months Ended March 31,
	2020		2019		2021		2020
Delaware Basin	$	221	$	225	$	397	$	221
Anadarko Basin						9		8
Williston Basin						28		—
Eagle Ford						14		94
Powder River Basin		85		56		33		85
Eagle Ford		94		55
Anadarko Basin		8		136
Other		3		11		—		3
Total oil and gas		411		483		481		411
Midstream		8		—		5		8
Other		6		7		13		6
Total capital expenditures	$	425	$	490	$	499	$	425
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. Capital expenditures increased in 2021 primarily due to the Merger closing on January 7, 2021 and results now including activity related to WPX legacy assets in the Delaware Basin in Texas and New Mexico and the

Williston Basin in North Dakota. Our capital program is designed to operate within or near operating cash flow. This is evidenced by our operating cash flow ~~fully~~ funding all of our capital expenditures for the three months ended March 31, ~~2020 and 89% of~~

~~capital expenditures for the three months ended March 31, 2019.~~2021. Our capital investment program is driven by a disciplined allocation process focused on returns. Our capital expenditures are ~~lower in 2020 primarily due~~expected to ~~our decreased spending in~~range between $1.7 billion to $2.0 billion for 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.full year 2021.

~~During~~Subsequent to the Merger closing, we redeemed $43 million of 6.00% notes, $175 million of 5.875% notes and $315 million of 4.50% notes in the first quarter of ~~2019, our debt decreased $162~~2021. We also paid $27 million ~~due~~of cash retirement costs related to ~~the repayment of our 6.30% senior notes at maturity.~~these redemptions.

WeAs part of our fixed dividend program, we paid common stock dividends of ~~$34~~$76 million ($~~0.09~~0.11 per share) and $34 million ($~~0.08~~0.09 per share) during the first three months of 2021 and 2020, ~~and 2019,~~ respectively. ~~In February 2020, we announced a 22% increase to~~We raised our quarterly dividend by 22% to $0.11 per share ~~beginning~~ in the second quarter of 2020. ~~Beginning with~~In addition to the ~~second~~fixed quarterly dividend, we paid a $127 million ($0.19 per share) variable dividend in the first quarter of ~~2019, we increased our quarterly dividend to $0.09 per share.~~2021.

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.~~2020. For additional information, see Note 1617 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

During the first ~~quarter~~three months of ~~2020,~~2021, we did not ~~received $5 million in~~receive any contributions from our noncontrolling interests in CDM and distributed $3$4 million to our noncontrolling interests in CDM.

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.

~~Operating cash flows in~~ In the first quarter of ~~2020 include $153~~2021, we paid $24 million to purchase the noncontrolling interest portion of ~~cash income tax payments in Canada related~~a partnership that WPX had formed to ~~divestitures. Additionally, operating cash flow was negatively affected~~acquire minerals 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 2~~Delaware Basin.~~and~~ ~~Note 17~~ ~~in “Part I. Financial Information – Item 1. Financial Statements” in this report for additional details on these divestitures.~~

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.

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

Historically, our primary sources of capital funding and liquidity have been our operating cash flow, cash on hand and asset divestiture proceeds. Additionally, we maintain a commercial paper program, supported by our revolving line of credit, which can be

accessed as needed to supplement operating cash flow and cash balances. If needed, we can also issue debt and equity securities, including through transactions under our shelf registration statement filed with the SEC. We estimate the combination of our sources of capital will continue to be adequate to fund our planned post-merger capital requirements as discussed in this ~~section.~~

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 withinsection as well as accelerate our ~~capital program as we continue to focus on protecting our financial strength and maintaining operational continuity.~~cash-return business model.

Key inputs into determining our planned capital investment ~~are~~is the ~~amounts~~amount of cash we hold and operating cash flow we expect to generate over the next one to three or more years. At the end of the first quarter of ~~2020,~~2021, we held approximately ~~$1.7~~$1.9 billion of cash, inclusive of ~~$200~~$195 million of cash restricted primarily for ~~discontinued operations.~~retained obligations related to divested assets. Our operating cash flow forecasts 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 variables for our operating cash flow are the prices of the oil, gas and NGLs we produce and sell. Prices are determined primarily by prevailing market conditions. Regional and worldwide economic activity, weather and other ~~substantially~~highly variable factors influence market conditions for these products. These factors, which are difficult to predict, create volatility in prices and are beyond our control.

Actions taken by governments around the world in response to the COVID-19 pandemic have led to an unprecedented decline in 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 less than $20/Bbl in April.38

To mitigate some of the risk inherent in prices, we utilize various derivative financial instruments to protect a portion of our production against downside price risk. We hedge our production in a manner that systematically places hedges for several quarters in advance, allowing us to maintain a disciplined risk management program as it relates to commodity price volatility. We supplement the systematic hedging program with discretionary hedges that take advantage of favorable market conditions. ~~For 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 financial instruments as of March 31, ~~2020~~2021 are presented in Note 3 in “Part I. Financial Information – Item 1. Financial Statements” of this report.

Further, when considering the current commodity price environment and our current hedge position, we expect to achieve our capital investment priorities. Additionally, as commodity prices begin to recover from the COVID-19 pandemic, we remain committed to a maintenance capital program for the foreseeable future. We do not intend to add any growth projects until market fundamentals recover, excess inventory clears up and OPEC+ curtailed volumes are effectively absorbed by the world markets.

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.

Cost savings from synergies resulting from the Merger are expected to be attained through cost reductions and efficiencies related to our capital programs, G&A, financing costs and production expenses. We anticipate the planned $600 million reduction of annualized costs will occur by year-end 2021. Approximately 35% of the reduced costs are related to our capital programs and the remainder relate to our operating expenses, including G&A, interest expense and production expenses.

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

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

In ~~April 2020,~~conjunction with the Merger closing on January 7, 2021, we ~~amended~~assumed a principal value of $3.3 billion of WPX debt. Subsequent to the ~~terms on the sale of~~Merger closing, we have reduced our ~~Barnett Shale assets with an expected close date of December 31, 2020.~~ ~~Under the terms of the agreement, we received the deposit funds of $170~~debt by approximately $530 million in the first quarter of 2021. Additionally, we redeemed $210 million of 5.25% notes in April ~~2020. The deposit is being held by us pursuant~~2021. In May 2021, we gave notice to exercise our early redemption to fully retire the ~~terms of the sale agreement, which only requires us~~5.75% senior notes due 2026 in June 2021. We expect these redemptions to ~~return such funds to BKV in the event the transaction does not close as a result of~~lower our ~~breach of our closing obligations.~~

~~In response to the current macro-economic environment, we reduced our 2020 capital expenditures outlook~~annual cash net financing costs 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 $0.6 billion to $0.7 billion. As economic factors change, we will continue to be flexible with our capital program.$70 million.

As of March 31, ~~2020,~~2021, we had approximately $3.0 billion of available borrowing capacity under our Senior Credit Facility. This credit facility supports our $3.0 billion of short-term credit under our commercial paper program. At March 31, ~~2020,~~2021, there were no borrowings under our commercial paper program, and we were in compliance with the Senior Credit Facility’s financial covenant.

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

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

Following the closing of the Merger, Devon initiated a new “fixed plus variable” dividend strategy. The fixed dividend is currently paid quarterly at a rate of $0.11 per share, and the Board of Directors will consider a number of factors when setting the quarterly dividend, if any, including a general target of paying out approximately 10% of operating cash flow through the fixed dividend. In ~~December 2019,~~addition to the fixed quarterly dividend, Devon may pay a variable dividend up to 50 percent of its excess free cash flow, which is a non-GAAP measure. Each quarter’s excess free cash flow is computed as operating cash flow (a GAAP measure) before balance sheet changes, less capital expenditures and the fixed dividend. The declaration and payment of any future dividend, whether fixed or variable, will remain at the full discretion of our Board of Directors ~~approved a $1.0 billion share repurchase program that expires~~and will depend on ~~December 31, 2020. Through March 31, 2020, we had executed $38 million of the authorized program. However,~~ ~~as the pricing~~Devon’s financial results, cash requirements, future prospects, COVID-19 impacts 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 Barnett Shale divestiture, we do not anticipate being able to purchase more than $200 million of the $1.0 billion authorizationother factors deemed relevant by the ~~program expiration date. We will monitor economic conditions as they develop~~Board.

In May 2021, Devon announced a cash dividend in the amount of $0.34 per share payable in the second quarter of 2021. The dividend consists of a fixed quarterly dividend in the amount of approximately $74 million (or $0.11 per share) and ~~may resume share repurchases~~a variable quarterly dividend in the amount of approximately $155 million (or $0.23 per share).

Our 2021 exploration and development budget for the ~~remaining $162 million, subject~~remainder of 2021 is expected to ~~the commodity price environment, the Company’s liquidity and capital resources and other factors.~~range from approximately $1.1 billion to $1.3 billion.

The amount of income taxes recorded requires interpretations of complex rules and regulations of federal, state, provincial and foreign tax jurisdictions. We recognize current tax expense based on estimated taxable income for the current period and the applicable statutory tax rates. We routinely assess potential uncertain tax positions and, if required, estimate and establish accruals for such amounts. We have recognized deferred tax assets and liabilities for temporary differences, operating losses and other tax carryforwards. We routinely assess our deferred tax assets and reduce such assets by a valuation allowance if we deem it is more likely than not that some portion or all of the deferred tax assets will not be realized. Due primarily to ~~an unprecedented downturn in the commodity price environment and the resulting asset impairments, Devon had~~ significant ~~deferred tax assets at March 31, 2020. Accordingly,~~cumulative losses, we ~~have reassessed the realizability of our~~recorded a full valuation allowance against U.S. deferred tax assets in ~~future periods~~2020 and ~~have recorded~~remain in a ~~100%~~full valuation allowance ~~against~~position at March 31, 2021.However, absent any additional objective negative evidence, and with the addition of subjective evidence such as forecasted taxable income, we may adjust the valuation allowance in future periods.

Further, in the event we were to undergo an “ownership change” (as defined in Section 382 of the Internal Revenue Code of 1986, as amended), our ability to use net ~~deferred~~operating losses and tax ~~assets.~~credits generated prior to the ownership change may be limited. Generally, an “ownership change” occurs if one or more shareholders, each of whom owns five percent or more in value of a corporation’s stock, increase their aggregate percentage ownership by more than 50 percent over the lowest percentage of stock owned by those shareholders at any time during the preceding three-year period. No ownership change has occurred during 2021 for Devon, but the Merger did cause an ownership change for WPX and increased the likelihood Devon could experience an ownership change over the next three years.

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

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

Estimated fair values ascribed to assets acquired can have a significant impact on future results of operations presented in ~~the variability of undiscounted pre-tax cash flows. For our impairment determinations, we historically have utilized NYMEX forward~~Devon’s financial statements. A higher fair value ascribed to a property results in higher DD&A expense, which results in lower net

~~strip~~earnings. Fair values are based on estimates of future commodity 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~~reserve quantities, development costs and operating ~~costs by using a method~~costs. In the event that ~~correlates cost movements~~future commodity prices or reserve quantities are lower than those used as inputs 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 effectdetermine estimates of ~~undiscounted and discounted pre-tax cash flows and impact~~acquisition date fair values, 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~~likelihood increases that certain costs may be determined 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.

~~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~~

In addition 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~~proved and ~~market conditions, changes in cost factors, actual~~unproved oil and ~~expected financial performance,~~gas properties, other 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~~assessments for the assets acquired and liabilities assumed in the Merger relate to debt, the ~~carrying value. If the~~equity method investment in Catalyst Midstream and out-of-market contract assets and liabilities. The fair value ~~is less than~~of the ~~carrying value,~~assumed WPX publicly traded debt was based on available third party quoted prices. We prepared estimates and engaged third party valuation experts to assist in the valuation of the equity method investment in Catalyst Midstream. Significant judgments and assumptions inherent in this estimate included projected Catalyst Midstream cash flows, comparable companies cash flow multiples and an ~~impairment charge will be recognized for the amount by which the carrying amount exceeds the fair value. Because quoted~~estimate of an applicable market ~~prices are not available, the~~participant discount rate. The fair value ~~is estimated based upon a valuation analyses including comparable companies~~of assumed out-of-market contract assets and ~~transactions~~liabilities associated with longer-term marketing, gathering, processing and ~~premiums paid.~~

~~Because~~transportation contracts included significant judgements and assumptions related to determining the trading price of 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 of March 31, 2020. While the cushion narrowed significantly since our last impairment evaluation, we concluded an impairment was not required as of March 31, 2020. The two most critical judgements included in the 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 end of 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 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 ourrates, estimates of future ~~operating results, which could result in future goodwill impairments due to~~reserves and production associated with the potential impact on the cash flows of our operations. The impairment of goodwill has no effect on liquidity or capital resources. However, it would adversely affect our results of operations in the period recognized.respective contracts and applying an applicable market participant discount rate.

We make reference to “core earnings (loss) attributable to Devon” and “core earnings (loss) per share attributable to Devon” in “Overview of ~~2020~~2021 Results” in this Item 2 that are not required by or presented in accordance with GAAP. These non-GAAP measures are not alternatives to GAAP measures and should not be considered in isolation or as a substitute for analysis of our results reported under GAAP. Core earnings (loss) attributable to Devon, as well as the per share amount, represent net earnings excluding certain ~~noncash~~non-cash 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 relate to asset dispositions, ~~noncash~~non-cash asset impairments (including ~~noncash~~non-cash unproved asset impairments), deferred tax asset valuation allowance, costs associated with early retirement of debt, fair value changes in derivative financial instruments, ~~and foreign currency,~~ changes in tax legislation and restructuring and transaction costs associated with the workforce reductions described further in ~~2019.~~Note 6.

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

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

	Three Months Ended March 31,												Three Months Ended March 31,
	Before tax			After tax			After Noncontrolling Interests			Per Diluted Share			Before tax			After tax			After Noncontrolling Interests			Per Diluted Share
2021
Total
Earnings (loss) attributable to Devon (GAAP)													$	(32	)	$	216		$	213		$	0.32
Adjustments:
Asset dispositions														(32	)		(24	)		(24	)		(0.04	)
Asset and exploration impairments														1			—			—			0.00
Deferred tax asset valuation allowance														—			(263	)		(263	)		(0.40	)
Fair value changes in financial instruments and foreign currency														294			225			225			0.34
Restructuring and transaction costs														189			162			162			0.25
Early retirement of debt														(20	)		(15	)		(15	)		(0.02	)
Core earnings attributable to Devon (Non-GAAP)													$	400		$	301		$	298		$	0.45
2020
Continuing Operations
Loss attributable to Devon (GAAP)	$	(2,107	)	$	(1,690	)	$	(1,691	)	$	(4.48	)	$	(2,107	)	$	(1,690	)	$	(1,691	)	$	(4.48	)
Adjustments:
Asset and exploration impairments		2,776			2,146			2,146			5.66			2,776			2,146			2,146			5.66
Deferred tax asset valuation allowance		—			108			108			0.28			—			108			108			0.28
Fair value changes in financial instruments		(619	)		(479	)		(479	)		(1.24	)		(619	)		(479	)		(479	)		(1.24	)
Change in tax legislation		—			(62	)		(62	)		(0.16	)		—			(62	)		(62	)		(0.16	)
Core earnings attributable to Devon (Non-GAAP)	$	50		$	23		$	22		$	0.06		$	50		$	23		$	22		$	0.06
Discontinued Operations
Loss attributable to Devon (GAAP)	$	(157	)	$	(125	)	$	(125	)	$	(0.34	)	$	(157	)	$	(125	)	$	(125	)	$	(0.34	)
Adjustments:
Asset impairments		179			141			141			0.38			179			141			141			0.38
Fair value changes in foreign currency and other		10			10			10			0.03			10			10			10			0.03
Core earnings attributable to Devon (Non-GAAP)	$	32		$	26		$	26		$	0.07		$	32		$	26		$	26		$	0.07
Total
Loss attributable to Devon (GAAP)	$	(2,264	)	$	(1,815	)	$	(1,816	)	$	(4.82	)	$	(2,264	)	$	(1,815	)	$	(1,816	)	$	(4.82	)
Adjustments:
Continuing Operations		2,157			1,713			1,713			4.54			2,157			1,713			1,713			4.54
Discontinued Operations		189			151			151			0.41			189			151			151			0.41
Core earnings attributable to Devon (Non-GAAP)	$	82		$	49		$	48		$	0.13		$	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

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~~sales less production expenses. Production expenses consist of lease operating, gathering, processing and transportation expenses, as well as production and property taxes.

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

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

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

	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
Net loss (GAAP)	$	(1,815	)	$	(317	)
Net (earnings) loss from discontinued operations, net of tax		125			(61	)
Net earnings (loss) (GAAP)							$	216		$	(1,815	)
Net loss from discontinued operations, net of tax								—			125
Financing costs, net		65			60			77			65
Income tax benefit		(417	)		(119	)		(248	)		(417	)
Exploration expenses		112			4			3			112
Depreciation, depletion and amortization		401			360			467			401
Asset impairments		2,666			—			—			2,666
Asset dispositions		—			(45	)		(32	)		—
Share-based compensation		20			23			20			20
Derivative and financial instrument non-cash valuation changes		(619	)		638			296			(619	)
Restructuring and transaction costs		—			51			189			—
Accretion on discounted liabilities and other		(48	)		(22	)		(29	)		(48	)
EBITDAX (non-GAAP)		490			572			959			490
Marketing and midstream revenues and expenses, net		18			(15	)		21			18
Commodity derivative cash settlements		(101	)		(34	)		232			(101	)
General and administration expenses, cash-based		82			112
General and administrative expenses, cash-based								87			82
Field-level cash margin (non-GAAP)	$	489		$	635		$	1,299		$	489

As of March 31, ~~2020,~~2021, we have commodity derivatives that pertain to a portion of our estimated production for the last nine months of ~~2020,~~2021, as well as for ~~2021.~~2022, 2023 and 2024. The key terms to our open oil, gas and NGL derivative financial instruments are presented in Note 3 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

The fair values of our commodity derivatives are largely determined by the forward curves of the relevant price indices. At March 31, ~~2020,~~2021, a 10% change in the forward curves associated with our commodity derivative instruments would have changed our net positions by approximately ~~$140~~$335 million.

As of March 31, ~~2020,~~2021, we had total debt of ~~$4.3~~$7.3 billion. All of our debt is based on fixed interest rates averaging ~~6.0%~~5.6%.

Devon has certain Canadian dollar obligations associated with its divested Canadian operations which are to be paid with the cash restricted for discontinued operations. These balances are remeasured using the applicable exchange rate as of the end of the reporting period. A 10% unfavorable change in the Canadian-to-U.S. dollar exchange rate would not have materially impacted ourWe had no material foreign currency risk at March 31, ~~2020 balance sheet for these items. See~~ ~~Note 17~~ ~~in “Part I. Financial Information – Item 1. Financial Statements” in this report for additional information.~~2021.

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

Based on their evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of March 31, ~~2020~~2021 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.

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

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

We are involved in various legal proceedings incidental to our business. However, to our knowledge as of the date of this report and subject to the matter noted below, there were no material pending legal proceedings to which we are a party or to which any of our property is subject.

On April 7, 2020, WPX Energy, Inc., a wholly-owned subsidiary of the Company, received a notice of violation from the EPA relating to specific historical air emission events occurring on the Fort Berthold Indian Reservation in North Dakota. We have since received information from the EPA that specifies the particular facilities to which the notice of violation applies. We have been in the process of providing the EPA with additional information regarding the specific events and responding to broader information requests from the EPA. Although this matter is ongoing and management cannot predict its ultimate outcome, the resolution of this matter may result in a fine or penalty in excess of $300,000.

~~Except for the addition of the pandemic risk factor discussed below, there~~There have been no material changes to the information included in Item 1A. “Risk Factors” in our ~~2019~~2020 Annual Report on Form 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.~~

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~~.

The following table provides information regarding purchases of our common stock that were made by us during the first quarter of ~~2020~~2021 (shares in thousands).

Period	Total Number of Shares Purchased ⁽¹⁾		Average Price Paid per Share		Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs ⁽²⁾		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ⁽²⁾		Total Number of Shares Purchased ⁽¹⁾		Average Price Paid per Share
January 1 - January 31		18	$	24.99		—	$	1,000		15	$	18.29
February 1 - February 29		2,175	$	18.71		1,568	$	973
February 1 - February 28										1,011	$	19.30
March 1 - March 31		830	$	16.01		675	$	962		798	$	22.92
Total		3,023	$	18.00		2,243				1,824	$	20.87

Under the Devon Plan, eligible employees 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 5,800 shares of our common stock in the first quarter of 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.

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.

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

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


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

Part I. Financial Information
Item 1.	Financial Statements	6
	Consolidated Statements of Comprehensive Earnings	6
	Consolidated Statements of Cash Flows	7
	Consolidated Balance Sheets	8
	Consolidated Statements of Equity	9
	Notes to Consolidated Financial Statements	10
	Note 1 – Summary of Significant Accounting Policies	10
	Note 2 – Acquisitions and Divestitures	11
	Note 3 – Derivative Financial Instruments	1113
	Note 4 – Share-Based Compensation	1415
	Note 5 – Asset Impairments	1516
	Note 6 – Restructuring and Transaction Costs	1517
	Note 7 – Income Taxes	1618
	Note 8 – Net Earnings (Loss) Per Share From Continuing Operations	1719
	Note 9 – Other Comprehensive Earnings (Loss)	1719
	Note 10 – Supplemental Information to Statements of Cash Flows	1820
	Note 11 – Accounts Receivable	1820
	Note 12 – Property, Plant and Equipment	1820
	Note 13 – Debt and Related Expenses	1921
	Note 14 – Leases	1922
	Note 15 – Asset Retirement Obligations	2022
	Note 16 – ~~Stockholders’ Equity~~	20
	~~Note 17 – Discontinued Operations and Assets Held For Sale~~	21
	~~Note 18 – Commitments and Contingencies~~Other Long-Term Liabilities	23
	Note 17 – Stockholders’ Equity	23
	Note 18 – Discontinued Operations	24
	Note 19 – Commitments and Contingencies	25
	Note 20 – Fair Value Measurements	2426
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2528
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4244
Item 4.	Controls and Procedures	4244

Part II. Other Information
Item 1.	Legal Proceedings	4345
Item 1A.	Risk Factors	4345
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4445
Item 3.	Defaults Upon Senior Securities	4445
Item 4.	Mine Safety Disclosures	4445
Item 5.	Other Information	4445
Item 6.	Exhibits	4546

Signatures		4647

	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

	Price Swaps				Price Swaptions				Price Collars						Call Options Sold
Period	Volume (Bbls/d)		Weighted Average Price ($/Bbl)		Volume (Bbls/d)		Weighted Average Price ($/Bbl)		Volume (Bbls/d)		Weighted Average Floor Price ($/Bbl)		Weighted Average Ceiling Price ($/Bbl)		Volume (Bbls/d)		Weighted Average Price ($/Bbl)
Q2-Q4 2021		81,122	$	40.45		6,691	$	40.12		40,905	$	39.84	$	49.84		5,000	$	39.50
Q1-Q4 2022		25,619	$	43.82		10,323	$	46.46		15,733	$	44.92	$	54.92		—	$	—


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

	Preliminary Purchase Price Allocation
Consideration:
WPX Common Stock outstanding		561.2
Exchange Ratio		0.5165
Devon common stock issued		289.9
Devon closing price on January 7, 2021	$	18.57
Total common equity consideration		5,383
Share-based replacement awards		49
Total consideration	$	5,432
Assets acquired:
Cash, cash equivalents and restricted cash	$	344
Accounts receivable		425
Other current assets		49
Right-of-use assets		38
Proved oil and gas property and equipment		7,017
Unproved and properties under development		2,367
Other property and equipment		485
Investments		400
Other long-term assets		43
Total assets acquired	$	11,168
Liabilities assumed:
Accounts payable	$	346
Revenue and royalties payable		223
Other current liabilities		454
Debt		3,562
Lease liabilities		38
Asset retirement obligations		94
Deferred income taxes		254
Other long-term liabilities		765
Total liabilities assumed		5,736
Net assets acquired	$	5,432

	Three Months Ended March 31,
Continuing operations:	2020
Total revenues	$	3,485
Net loss	$	(1,864	)
Basic net loss per share	$	(2.77	)

	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

	Price Swaps ⁽¹⁾				Price Swaptions ⁽²⁾				Price Collars ⁽²⁾						Call Options Sold ⁽²⁾
Period	Volume (MMBtu/d)		Weighted Average Price ($/MMBtu)		Volume (MMBtu/d)		Weighted Average Price ($/MMBtu)		Volume (MMBtu/d)		Weighted Average Floor Price ($/MMBtu)		Weighted Average Ceiling Price ($/MMBtu)		Volume (MMBtu/d)		Weighted Average Price ($/MMBtu)
Q2-Q4 2021		270,636	$	2.63		—	$	—		196,218	$	2.46	$	2.96		50,000	$	2.68
Q1-Q4 2022		3,452	$	2.85		100,000	$	2.70		69,110	$	2.54	$	3.04		—	$	—

	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	)

		Price Swaps
Period	Product	Volume (Bbls/d)		Weighted Average Price ($/Bbl)
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

	Other			Other
	Current			Long-term
	Liabilities			Liabilities			Total
Balance as of December 31, 2020	$	35		$	137		$	172
Changes related to 2021 workforce reductions		61			—			61
Changes related to prior years' restructurings		(2	)		(7	)		(9	)
Balance as of March 31, 2021	$	94		$	130		$	224

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

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

	Total Number of Shares Purchased		Dollar Value of Shares Purchased		Average Price Paid per Share
$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

	March 31, 2021		December 31, 2020
Assumed gathering, processing and transportation contracts	$	482	$	—
Pension and post retirement benefit obligations		225		243
Restructuring and transaction costs		130		137
Estimated future obligation under a performance guarantee		128		—
Commodity derivatives		122		5
Other		182		166
Total other long-term liabilities	$	1,269	$	551

	Amounts		Rate Per Share
2021:
Fixed	$	76	$	0.11
Variable		127		0.19
Total	$	203	$	0.30
2020:
Fixed	$	34	$	0.09

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

	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

Exhibit Number		Description

4.1	Stockholders’ Agreement, by and among Devon Energy Corporation, Felix Investment Holdings II, LLC, and EnCap Energy Capital Fund X, L.P., dated January 7, 2021 (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed January 7, 2021; File No. 001-32318).

4.2	Registration Rights Agreement, by and between Devon Energy Corporation and Felix Investment Holdings II, LLC, dated January 7, 2021 (incorporated by reference to Exhibit 10.2 to Registrant’s Form 8-K filed January 7, 2021; File No. 001-32318).

10.1*			~~2020~~2021 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).~~awarded.

10.2*			~~2020~~2021 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).~~awarded.

10.3*			~~2020 Form~~2021 Amendment (effective as of ~~Notice of Grant of Restricted Stock Award and Award Agreement under~~January 7, 2021) to the Devon Energy Corporation 2017 Long-Term Incentive Plan ~~between Devon Energy Corporation and certain officers for restricted stock awarded (SVP form)~~(incorporated by reference to Exhibit 10.7 to Registrant’s Form 10-K filed February 17, 2021; File No. 001-32318).

10.4*	Employment Agreement, dated January 7, 2021, by and between Registrant and Richard E. Muncrief (incorporated by reference to Exhibit 10.3 to Registrant’s Form 8-K filed January 7, 2021; File No. 001-32318).

10.5*	Employment Agreement, dated January 7, 2021, by and between Registrant and Clay M. Gaspar (~~2020~~incorporated by reference to Exhibit 10.4 to Registrant’s Form ~~of Notice of Grant of Performance Share Unit Award~~8-K filed January 7, 2021; File No. 001-32318).

10.6*	Employment Agreement, dated January 7, 2021, by and ~~Award Agreement under the 2017 Long-Term Incentive Plan~~ between ~~Devon Energy Corporation~~Registrant and ~~certain officers for performance based restricted share units awarded (SVP form)~~Dennis C. Cameron (incorporated by reference to Exhibit 10.5 to Registrant’s Form 8-K filed January 7, 2021; File No. 001-32318).

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

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

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

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

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

101.SCH			Inline XBRL Taxonomy Extension Schema Document.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document.

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

				DEVON ENERGY CORPORATION

Date: May ~~6, 2020~~5, 2021				/s/ Jeremy D. Humphers
				Jeremy D. Humphers
				Senior Vice President and Chief Accounting Officer