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 ~~21, 2021, 676.9~~20, 2022, 660.0 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 ~~thi~~sthis Quarterly Report on Form 10-Q:

“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.

“~~Devon Plan”~~ESG” means ~~Devon Energy Corporation Incentive Savings Plan.~~environmental, social and governance.

~~“Federal Funds Rate” means 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.

“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:

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.

									Retained			Other
						Additional			Earnings			Comprehensive																							Other
	Common Stock					Paid-In			(Accumulated			Earnings			Treasury			Noncontrolling			Total								Additional						Comprehensive
	Shares			Amount		Capital			Deficit)			(Loss)			Stock			Interests			Equity			Common Stock					Paid-In			Retained			Earnings			Treasury			Noncontrolling			Total
	(Unaudited)																							Shares			Amount		Capital			Earnings			(Loss)			Stock			Interests			Equity
																								(Unaudited)
Three Months Ended March 31, 2022
Balance as of December 31, 2021																									663		$	66	$	7,636		$	1,692		$	(132	)	$	—		$	137		$	9,399
Net earnings																									—			—		—			989			—			—			6			995
Other comprehensive earnings, net of tax																									—			—		—			—			1			—			—			1
Restricted stock grants, net of cancellations																									2			—		1			—			—			—			—			1
Common stock repurchased																									—			—		—			—			—			(305	)		—			(305	)
Common stock retired																									(5	)		—		(286	)		—			—			286			—			—
Common stock dividends																									—			—		—			(668	)		—			—			—			(668	)
Share-based compensation																									1			—		20			—			—			—			—			20
Distributions to noncontrolling interests																									—			—		—			—			—			—			(8	)		(8	)
Balance as of March 31, 2022																									661		$	66	$	7,371		$	2,013		$	(131	)	$	(19	)	$	135		$	9,435
Three Months Ended March 31, 2021
Balance as of December 31, 2020		382		$	38	$	2,766		$	208		$	(127	)	$	—		$	134		$	3,019			382		$	38	$	2,766		$	208		$	(127	)	$	—		$	134		$	3,019
Net earnings		—			—		—			213			—			—			3			216			—			—		—			213			—			—			3			216
Other comprehensive earnings, net of tax		—			—		—			—			23			—			—			23			—			—		—			—			23			—			—			23
Restricted stock grants, net of cancellations		4			—		—			—			—			—			—			—			4			—		—			—			—			—			—			—
Common stock repurchased		—			—		—			—			—			(38	)		—			(38	)		—			—		—			—			—			(38	)		—			(38	)
Common stock retired		(2	)		—		(38	)		—			—			38			—			—			(2	)		—		(38	)		—			—			38			—			—
Common stock dividends		—			—		—			(203	)		—			—			—			(203	)		—			—		—			(203	)		—			—			—			(203	)
Common stock issued		290			29		5,403			—			—			—			—			5,432			290			29		5,403			—			—			—			—			5,432
Share-based compensation		1			—		41			—			—			—			—			41			1			—		41			—			—			—			—			41
Contributions from noncontrolling interests		—			—		—			—			—			—			—			—
Distributions to noncontrolling interests		—			—		—			—			—			—			(4	)		(4	)		—			—		—			—			—			—			(4	)		(4	)
Balance as of March 31, 2021		675		$	67	$	8,172		$	218		$	(104	)	$	—		$	133		$	8,486			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
Net earnings (loss)		—			—		—			(1,816	)		—			—			1			(1,815	)
Other comprehensive earnings, net of tax		—			—		—			—			1			—			—			1
Restricted stock grants, net of cancellations		3			—		—			—			—			—			—			—
Common stock repurchased		—			—		—			—			—			(54	)		—			(54	)
Common stock retired		(3	)		—		(54	)		—			—			54			—			—
Common stock dividends		—			—		—			(34	)		—			—			—			(34	)
Share-based compensation		1			—		20			—			—			—			—			20
Contributions from noncontrolling interests		—			—		—			—			—			—			5			5
Distributions to noncontrolling interests		—			—		—			—			—			—			(3	)		(3	)
Balance as of March 31, 2020		383		$	38	$	2,701		$	1,298		$	(118	)	$	—		$	121		$	4,040

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~~$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~~final 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 Merger closing on January 7, 2021, all activity in~~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 is based on our historical 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 results.

~~On March 3,~~ 2021, Devon completed the sale of non-core assets in the Rockies for proceeds of $9 million, net of purchase price adjustments, and recognized a ~~$35~~$35 million gain related to the sale. ~~The transaction includes~~Devon received $4 million in contingent earnout payments related to this transaction in the first quarter of 2022 with the potential for up to ~~$8 million.~~ an additional $4 million in the future. The total estimated proved reserves associated with these divested assets ~~are~~was approximately 3 ~~MMBoe.~~ ~~As of December 31, 2020, the associated assets and liabilities were classified as assets held for sale and included in other current assets and other current liabilities, respectively.~~MMBoe.

Devon ~~completed~~is entitled to contingent earnout payments associated with the sale of its Barnett Shale assets to BKV for 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,in 2020 with upside participation beginning at a ~~$2.75~~$2.75 Henry Hub natural gas price or a ~~$50~~$50 WTI oil price. The contingent payment period commenced on January 1, 2021 and has a term of four years. Devon ~~recognized a $748~~received $65 million ~~asset impairment~~in contingent earnout payments related to ~~these~~this transaction in the first quarter of 2022 and could receive up to an additional $195 million in contingent earnout payments for the remaining performance periods depending on future commodity prices. The valuation of the future contingent earnout payments included within other current assets and other long-term assets in the ~~fourth quarter of 2019 and incremental asset impairments of $179~~March 31, 2022 consolidated balance sheet was approximately $51 million and $3$60 million, ~~during the first quarter~~respectively. The value was derived utilizing a Monte Carlo valuation model and ~~third quarter of 2020, respectively. Additional information can be found inNote 18~~.qualifies as a level 3 fair value measurement.

Derivative ~~Financial~~Financial Instruments

Objectives and Strategies

Devon enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production to hedge future prices received. Additionally, Devon periodically enters into derivative financial instruments with respect to a portion of its oil, gas and NGL marketing activities. These commodity derivative financial instruments include financial price swaps, ~~price swaptions,~~ basis swaps, costless price collars and call options. Devon periodically enters into interest rate swaps to manage its exposure to interest rate volatility. As of March 31, ~~2021,~~2022, Devon did not have any open interest rate swap contracts.

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

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

Counterparty Credit Risk

By using derivative financial instruments, Devon is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with a number of 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, ~~2021,~~2022, Devon neither held cash collateral of its counterparties 0r0r posted cash collateral to its counterparties.

~~Table~~ Given Devon's current credit ratings and the terms of ~~Contents~~

~~DEVON ENERGY CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~the underlying contracts, Devon is not currently required to post collateral to its counterparties with respect to its open derivative positions, and we would not be required to post any such collateral as a result of any change to the amount of Devon's net liability for such positions.

Commodity Derivatives

As of March 31, ~~2021,~~2022, Devon had the following open oil derivative positions. The first table presents Devon’s oil derivatives that settle against the average of the prompt month NYMEX WTI futures price. The second table presents Devon’s oil derivatives that settle against the respective indices noted within the ~~table~~table..

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

—

$
—


	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 2022		35,258	$	44.50		37,658	$	55.56	$	74.84
Q1-Q4 2023		—	$	—		6,193	$	61.32	$	97.65


	Oil Basis Swaps
Period	Index	Volume (Bbls/d)		Weighted Average Differential to WTI ($/Bbl)
Q2-Q4 2022	BRENT		1,000	$	(7.75	)
Q2-Q4 2022	NYMEX Roll		29,000	$	0.45
Q1-Q4 2023	Midland Sweet		3,000	$	0.73

Oil Basis Swaps

Period

Index

Volume
(Bbls/d)

Weighted Average
Differential to WTI
($/Bbl)

Q2-Q4 2021

Midland Sweet

22,669

$
0.84

Q2-Q4 2021

Guernsey Light Sweet

2,007

$
(1.48
)
Q2-Q4 2021

BRENT

1,000

$
(8.00
)
Q2-Q4 2021

NYMEX Roll

11,676

$
0.38

Q1-Q4 2022

BRENT

1,000

$
(7.75
)
Q1-Q4 2022

NYMEX Roll

16,000

$
0.37

As of March 31, ~~2021,~~2022, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index and the end of month NYMEX index. The second table presents Devon’s natural gas derivatives that settle against the respective indices noted within the table.


	Price Swaps (1)				Price Collars (2)
Period	Volume (MMBtu/d)		Weighted Average Price ($/MMBtu)		Volume (MMBtu/d)		Weighted Average Floor Price ($/MMBtu)		Weighted Average Ceiling Price ($/MMBtu)
Q2-Q4 2022		110,000	$	2.79		209,509	$	2.98	$	4.30
Q1-Q4 2023		4,959	$	3.65		58,901	$	3.38	$	5.64

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

—

$
—

(1)

Related to the 2022 open positions, 10,000 MMBtu/d settle against the Inside FERC first of month Henry Hub index at an average price of $3.65 and 100,000 MMBtu/d settle against the end of month NYMEX index at an average price of $2.70. All 2023 open positions settle against the Inside FERC first of month Henry Hub index.

(2)

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

~~(1)~~

Related to the 2021 open positions, 30,636 MMBtu/d settle against the Inside FERC first of month Henry Hub index at an average price of $2.76 and 240,000 MMBtu/d settle against the end of month NYMEX index at an average price of $2.62. All 2022 open positions settle against the Inside FERC first of month Henry Hub index.

~~(2)~~

~~Price swaptions and call options settle against end of the month NYMEX index. Price collars settle against the Inside FERC first of the month Henry Hub Index.~~

Natural Gas Basis Swaps

Period

Index

Volume
(MMBtu/d)

Weighted Average
Differential to
Henry Hub
($/MMBtu)

Q2-Q4 2021

El Paso Natural Gas

35,000

$
(0.92
)
Q2-Q4 2021

WAHA

80,000

$
(0.65
)
Q1-Q4 2022

WAHA

70,000

$
(0.57
)
Q1-Q4 2023

WAHA

70,000

$
(0.51
)
Q1-Q4 2024

WAHA

40,000

$
(0.51
)

1412

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)


	Natural Gas Basis Swaps
Period	Index	Volume (MMBtu/d)		Weighted Average Differential to Henry Hub ($/MMBtu)
Q2-Q4 2022	El Paso Natural Gas		40,000	$	(0.82	)
Q2-Q4 2022	Houston Ship Channel		10,000	$	(0.17	)
Q2-Q4 2022	WAHA		70,000	$	(0.57	)
Q1-Q4 2023	El Paso Natural Gas		60,000	$	(1.50	)
Q1-Q4 2023	WAHA		70,000	$	(0.51	)
Q1-Q4 2024	WAHA		40,000	$	(0.51	)

As of March 31, ~~2021,~~2022, Devon ~~had the following~~did not have any open NGL ~~derivative~~ positions. ~~Devon’s NGL positions settle against the average of the prompt month OPIS Mont Belvieu, Texas index.~~

Price Swaps

Period

Product

Volume (Bbls/d)

Weighted Average Price ($/Bbl)

Q2-Q4 2021

Natural Gasoline

1,000

$
47.57

Q2-Q4 2021

Normal Butane

1,000

$
31.40

Q2-Q4 2021

Propane

1,000

$
27.88

Financial Statement Presentation

~~The following table presents the derivative fair values by~~All derivative financial ~~instrument type followed by~~instruments are recognized at their current fair value as either assets or liabilities in the ~~corresponding individual~~ consolidated balance ~~sheets caption.~~sheets. Amounts related to contracts allowed to be netted upon payment subject to a master netting arrangement with the same counterparty are reported on a net basis in the consolidated balance sheets. The tables below present a summary of these positions as of March 31, 2022 and December 31, 2021.


	March 31, 2022									December 31, 2021
	Gross Fair Value			Amounts Netted			Net Fair Value			Gross Fair Value			Amounts Netted			Net Fair Value			Balance Sheet Classification
Commodity derivatives:
Short-term derivative asset	$	15		$	(14	)	$	1		$	6		$	(4	)	$	2		Other current assets
Long-term derivative asset		31			—			31			6			—			6		Other long-term assets
Short-term derivative liability		(953	)		14			(939	)		(579	)		4			(575	)	Other current liabilities
Long-term derivative liability		(1	)		—			(1	)		(2	)		—			(2	)	Other long-term liabilities
Total derivative liability	$	(908	)	$	—		$	(908	)	$	(569	)	$	—		$	(569	)

March 31, 2021

December 31, 2020

Commodity derivative assets:

Other current assets

$
3

$
5

Other long-term assets

3

1

Total derivative assets

$
6

$
6

Commodity derivative liabilities:

Other current liabilities

$
667

$
143

Other long-term liabilities

122

5

Total derivative liabilities

$
789

$
148

Share-Based Compensation

4.~~Share-Based Compensation~~

The table below presents the share-based compensation expense included in Devon’s accompanying consolidated statements of comprehensive earnings. The vesting for certain share-based awards was accelerated in 2021 in conjunction with the reduction of workforce described in Note 65 and is included in restructuring and transaction costs in the accompanying consolidated statements of comprehensive ~~earnings~~earnings.


	Three Months Ended March 31,
	2022		2021
G&A	$	20	$	20
Restructuring and transaction costs		0		21
Total	$	20	$	41
Related income tax benefit	$	17	$	0

Three Months Ended March 31,

2021

2020

G&A

$
20

$
20

Restructuring and transaction costs

21

—

Total

$
41

$
20

1513

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Under its approved long-term incentive plan, Devon grants share-based awards to ~~certain~~its 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.


	Restricted Stock Awards & Units					Performance Share Units
	Awards/Units			Weighted Average Grant-Date Fair Value		Units				Weighted Average Grant-Date Fair Value
	(Thousands, except fair value data)
Unvested at 12/31/21		7,656		$	22.15		2,076			$	24.12
Granted		1,249		$	52.23		964			$	44.05
Vested		(2,476	)	$	23.02		(1,194	)		$	28.91
Forfeited		(8	)	$	29.42		0			$	0
Unvested at 3/31/22		6,421		$	27.66		1,846		(1)	$	31.43

Performance-Based

Performance

Restricted Stock Awards & Units

Restricted Stock Awards

Share Units

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)

Unvested at 12/31/20

5,316

$
25.82

44

$
44.70

1,994

$
31.89

Granted ⁽¹⁾

5,542

$
18.71

—

$
—

861

$
18.08

Vested

(4,329
)

$
22.63

(39
)

$
45.41

(754
)

$
37.40

Forfeited

(20
)

$
24.79

—

$
—

(25
)

$
36.04

Unvested at 3/31/21

6,509

$
21.89

5

$
38.54

2,076

⁽²
⁾
$
24.12

(1)

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

~~(1)~~

Due to the closing 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. As a result, approximately 4.9 million awards relate to the conversion of WPX equity awards to Devon equity awards.

~~(2)~~

~~A maximum of 4.2 million common shares could be awarded based upon Devon’s final TSR ranking.~~

The following table presents the assumptions related to the performance share units granted in ~~2021,~~2022, as indicated in the previous summary table.


	2021		2022
Grant-date fair value	$	18.08	$	68.68
Risk-free interest rate	0.18%			1.81	%
Volatility factor	67.8%			70.1	%
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, ~~2021.~~

Performance-Based

Restricted Stock

Restricted Stock

Performance

Awards/Units

Awards

Share Units

Unrecognized compensation cost

$
88

$
—

$
21

Weighted average period for recognition (years)

2.2

0.2

2.3

5.~~Asset~~ ~~Impairments~~

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

Three Months Ended March 31,

2021

2020

Proved oil and gas assets

$
—

$
2,664

Other assets

—

2

Total asset impairments

$
—

$
2,666

Unproved impairments

$
1

$
110

~~Table of Contents~~

~~DEVON ENERGY CORPORATION AND SUBSIDIARIES~~2022.

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


	Restricted Stock		Performance
	Awards/Units		Share Units
Unrecognized compensation cost	$	122	$	32
Weighted average period for recognition (years)		3.0		2.1

~~Due to the reduced demand from the COVID-19 pandemic causing an unprecedented downturn in the price of oil and reductions in near-term capital investment, Devon~~ ~~recognized approximately $2.7 billion of proved asset impairments during the first 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. During the first quarter of 2020, Devon also recognized $2 million of product line fill impairments.

~~Due to the 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.~~

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

Three Months Ended March 31,

2021

2020

Restructuring

$
143

$
—

Transaction costs

46

—

Total

$
189

$
—


	Three Months Ended March 31,
	2022		2021
Restructuring costs	$	0	$	143
Transaction costs		0		46
Total costs	$	0	$	189

In conjunction with the Merger closing, Devon recognized ~~$143~~$143 million of restructuring expenses during the first quarter of 2021 related to employee severance and termination benefits, settlements and curtailments from defined retirement benefits and contract terminations. Of these expenses, ~~$37~~$37 million and ~~$21~~$21 million resulted from settlements and curtailments of defined retirement benefits and accelerated vesting of share-based grants, respectively, which ~~are~~were non-cash charges. Additionally, in conjunction with the Merger closing, Devon recognized ~~$46~~$46 million of transaction costs primarily comprised of bank, legal and accounting fees.

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

The following table summarizes Devon’s restructuring liabilities.


	Other			Other
	Current			Long-term
	Liabilities			Liabilities			Total
Balance as of December 31, 2021	$	38		$	111		$	149
Changes related to prior years' restructurings		(4	)		(6	)		(10	)
Balance as of March 31, 2022	$	34		$	105		$	139

Balance as of December 31, 2020	$	35		$	137		$	172
Changes related to prior years' restructurings		59			(7	)		52
Balance as of March 31, 2021	$	94		$	130		$	224

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

6. Other, Net

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


	Three Months Ended March 31,
	2022			2021
Estimated future obligation under a performance guarantee	$	(96	)	$	0
Ukraine charitable pledge		20			0
Asset retirement obligation accretion		7			7
Severance and other non-income tax refunds		(3	)		(36	)
Other		11			0
Total	$	(61	)	$	(29	)

17The first quarter of 2022 includes a $96 million benefit related to the revision of a future obligation under a performance guarantee liability for previously divested assets. Due to improved commodity prices and market conditions, the purchaser of these assets was able to fully satisfy the $35 million obligation due in the first quarter of 2022. Further, as of March 31, 2022, Devon also reduced the estimated future exposure of the performance guarantee by $61 million based on probability-weighted cash flows for the remainder of the contract term of four years.

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

The first quarter of 2021 includes a Texas severance tax refund of $36 million related to prior periods.

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

7.7. Income Taxes

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

Three Months Ended March 31,

2021

2020

Loss from continuing operations before income taxes

$
(32
)

$
(2,107
)

Current income tax benefit

$
(5
)

$
(106
)
Deferred income tax benefit

(243
)

(311
)
Total income tax benefit

$
(248
)

$
(417
)

U.S. statutory income tax rate

21
%

21
%
State income taxes

(1
%)

1
%
Change in tax legislation

0
%

5
%
Unrecognized tax benefits

0
%

0
%
Other

(48
%)

(3
%)
Deferred tax asset valuation allowance

791
%

(4
%)
Effective income tax rate

763
%

20
%


	Three Months Ended March 31,
	2022		2021
Earnings (loss) before income taxes	$	1,262	$	(32	)

Current income tax expense (benefit)	$	103	$	(5	)
Deferred income tax expense (benefit)		164		(243	)
Total income tax expense (benefit)	$	267	$	(248	)


U.S. statutory income tax rate	21	%	21	%
State income taxes	1	%	(1	%)
Deferred tax asset valuation allowance	0	%	791	%
Other	(1	%)	(48	%)
Effective income tax rate	21	%	763	%

~~The~~

Prior to December 31, 2021, Devon maintained a valuation allowance against all U.S. federal deferred ~~income~~ tax ~~benefit recognized in the first quarter of 2021 primarily relates to the Merger. As shown in~~ ~~Note 2~~,assets. Devon recognized ~~$254~~approximately $250 million of deferred tax liabilities to account for the Merger. The recognition of these deferred tax liabilities caused a decrease to Devon’s net deferred tax assets and a corresponding decrease to the valuation allowance Devon ~~has~~had recognized on its U.S. ~~Federal~~federal deferred tax ~~assets.~~assets in the first quarter of 2021.

AsDue to significant increases in commodity pricing and projections of ~~March 31,~~future income, in the fourth quarter of 2021, Devon ~~continues to maintain a valuation allowance against materially all U.S. deferred tax assets. Devon continues to assess~~reassessed its ~~valuation allowance position every quarter. Absent any additional objective negative evidence, and with~~evaluation of the ~~addition~~realizability of ~~subjective evidence such as forecasted taxable income, Devon may adjust the valuation allowance on its~~ deferred tax assets in future ~~periods.~~years and determined that a U.S. federal valuation allowance was no longer necessary at December 31, 2021.

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

Net Earnings Per Share

The ~~Coronavirus Aid, Relief,~~following table reconciles net earnings 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 recoup previously paid taxes. As a result, Devon is carrying back net operating losses generated in 2020 and 2019 to 2015 and 2014, respectively. Because the U.S. Federal income tax rate was higherweighted-average common shares outstanding used in the ~~carryback periods, Devon recognized an income tax benefit~~calculations of basic and diluted net earnings per share.


	Three Months Ended March 31,
	2022			2021
Net earnings:
Net earnings	$	989		$	213
Attributable to participating securities		(16	)		(2	)
Basic and diluted earnings	$	973		$	211
Common shares:
Common shares outstanding - total		663			654
Attributable to participating securities		(7	)		(5	)
Common shares outstanding - basic		656			649
Dilutive effect of potential common shares issuable		2			2
Common shares outstanding - diluted		658			651
Net earnings per share:
Basic	$	1.48		$	0.33
Diluted	$	1.48		$	0.32

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

9. Other Comprehensive Earnings (Loss)

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


	Three Months Ended March 31,
	2022			2021
Pension and postretirement benefit plans:
Beginning accumulated pension and postretirement benefits	$	(132	)	$	(127	)
Recognition of net actuarial loss and prior service cost in earnings (1)		1			1
Settlement of pension benefits (2)		0			15
Other (3)		0			7
Accumulated other comprehensive loss, net of tax	$	(131	)	$	(104	)

(1)

Recognition of net actuarial loss and prior service cost are included in the ~~first quarter~~computation of ~~2020.~~net periodic benefit cost, which is a component of other, net in the accompanying consolidated statements of comprehensive earnings.

(2)

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

(3)

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

10.

Supplemental Information to Statements of Cash Flows


	Three Months Ended March 31,
	2022			2021
Changes in assets and liabilities, net:
Accounts receivable	$	(457	)	$	(63	)
Other current assets		64			(10	)
Other long-term assets		66			(10	)
Accounts payable and revenues and royalties payable		247			16
Other current liabilities		8			(33	)
Other long-term liabilities		(71	)		(27	)
Total	$	(143	)	$	(127	)
Supplementary cash flow data:
Interest paid	$	100		$	114
Income taxes refunded	$	(23	)	$	(6	)

11.

Accounts Receivable

Components of accounts receivable include the following:


	March 31, 2022			December 31, 2021
Oil, gas and NGL sales	$	1,296		$	984
Joint interest billings		161			158
Marketing and midstream revenues		496			370
Other		56			38
Gross accounts receivable		2,009			1,550
Allowance for doubtful accounts		(7	)		(7	)
Net accounts receivable	$	2,002		$	1,543

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

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

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,

2021

2020

Net earnings (loss) from continuing operations:

Net earnings (loss) from continuing operations

$
213

$
(1,691
)
Attributable to participating securities

(2
)

(1
)
Basic and diluted earnings (loss) from continuing operations

$
211

$
(1,692
)
Common shares:

Common shares outstanding - total

654

383

Attributable to participating securities

(5
)

(6
)
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

$
0.33

$
(4.48
)
Diluted

$
0.32

$
(4.48
)
Antidilutive options

—

—

9.	~~Other Comprehensive Earnings (Loss)~~

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

Three Months Ended March 31,

2021

2020

Pension and postretirement benefit plans:

Beginning accumulated pension and postretirement benefits

$
(127
)

$
(119
)
Recognition of net actuarial loss and prior service cost in earnings ⁽¹⁾

1

2

Settlement of pension benefits ⁽²⁾

15

—

Income tax expense

—

(1
)
Other ⁽³⁾

7

—

Accumulated other comprehensive loss, net of tax

$
(104
)

$
(118
)

~~(1)~~

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

~~(2)~~

~~(3)~~

~~Includes a remeasurement of the pension obligation due to the change in control described above which was partially offset by a change in mortality assumption.~~

~~Table of Contents~~

~~DEVON ENERGY CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~

~~10.~~

~~Supplemental Information to Statements of Cash Flows~~

Three Months Ended March 31,

2021

2020

Changes in assets and liabilities, net:

Accounts receivable

$
(63
)

$
238

Income tax receivable

15

(113
)
Other current assets

(25
)

(38
)
Other long-term assets

(10
)

(24
)
Accounts payable

71

42

Revenues and royalties payable

(55
)

(113
)
Other current liabilities

(33
)

(81
)
Other long-term liabilities

(27
)

33

Total

$
(127
)

$
(56
)
Supplementary cash flow data - total operations:

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.

~~11.~~

~~Accounts Receivable~~

~~Components of accounts receivable include the following:~~

March 31, 2021

December 31, 2020

Oil, gas and NGL sales

$
742

$
335

Joint interest billings

127

57

Marketing and midstream revenues

181

195

Other

54

25

Gross accounts receivable

1,104

612

Allowance for doubtful accounts

(15
)

(11
)
Net accounts receivable

$
1,089

$
601

12.Property, ~~Plan~~tPlant and Equipment

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


	March 31, 2022			December 31, 2021
Property and equipment:
Proved	$	38,524		$	38,051
Unproved and properties under development		1,101			1,081
Total oil and gas		39,625			39,132
Less accumulated DD&A		(26,059	)		(25,596	)
Oil and gas property and equipment, net		13,566			13,536
Other property and equipment		2,192			2,139
Less accumulated DD&A		(684	)		(667	)
Other property and equipment, net (1)		1,508			1,472
Property and equipment, net	$	15,074		$	15,008

March 31, 2021

December 31, 2020

Property and equipment:

Proved

$
35,119

$
27,589

Unproved and properties under development

2,692

392

Total oil and gas

37,811

27,981

Less accumulated DD&A

(23,985
)

(23,545
)
Oil and gas property and equipment, net

13,826

4,436

Other property and equipment

2,060

1,737

Less accumulated DD&A

(612
)

(780
)
Other property and equipment, net ⁽¹⁾

1,448

957

Property and equipment, net

$
15,274

$
5,393

(1)

$119 million and $111 million related to CDM in 2022 and 2021, respectively.

13.

Debt and Related Expenses

~~(1)~~

~~$106 million and $102 million related to CDM in 2021 and 2020, respectively.~~

~~Table of Contents~~

~~DEVON ENERGY CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~

~~13.~~

~~Debt and Related Expenses~~

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


	March 31, 2022			December 31, 2021
8.25% due August 1, 2023	$	242		$	242
5.25% due September 15, 2024		472			472
5.85% due December 15, 2025		485			485
7.50% due September 15, 2027		73			73
5.25% due October 15, 2027		390			390
5.875% due June 15, 2028		325			325
4.50% due January 15, 2030		585			585
7.875% due September 30, 2031		675			675
7.95% due April 15, 2032		366			366
5.60% due July 15, 2041		1,250			1,250
4.75% due May 15, 2042		750			750
5.00% due June 15, 2045		750			750
Net premium (discount) on debentures and notes		137			149
Debt issuance costs		(29	)		(30	)
Total long-term debt	$	6,471		$	6,482

Retirement of Senior Notes

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

5.75% due June 1, 2026 ⁽¹⁾

500

—

7.50% due September 15, 2027

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

7.95% due April 15, 2032

366

366

5.60% due July 15, 2041

1,250

1,250

4.75% due May 15, 2042

750

750

5.00% due June 15, 2045

750

750

Net premium (discount) on debentures and notes

226

(20
)
Debt issuance costs

(31
)

(31
)
Total debt

$
7,268

$
4,298

Less amount classified as short-term debt

226

—

Total long-term debt

$
7,042

$
4,298

~~(1)~~

~~These instruments were assumed by Devon in January 2021 in conjunction with the Merger. These instruments are the unsecured and unsubordinated obligation of WPX, a wholly-owned subsidiary of Devon.~~

~~The following schedule includes~~In the ~~summary~~first quarter of 2021, Devon redeemed $43 million of the ~~WPX debt Devon assumed upon closing~~6.00% senior notes due 2022, $175 million of the ~~Merger~~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 $20 million of gains on ~~January 7, 2021.~~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.

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

~~(1)~~

At any time prior to these dates, Devon has the option to redeem some or all of the notes at a specified "make whole" premium as described in the indenture documents governing the notes to be redeemed. On or after these dates, Devon has the option to redeem the notes, in whole or in part, at the applicable redemption prices set forth in the indenture documents, plus accrued and unpaid interest thereon to the redemption date as more fully described in such documents.

Credit Lines

Devon has a ~~$3.0~~$3.0 billion Senior Credit Facility. As of March 31, ~~2021,~~2022, Devon had 0 outstanding borrowings under the Senior Credit Facility and had issued $2$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%~~65%. Under the terms of the credit agreement, total capitalization is adjusted to add back ~~non-~~

2118

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

~~cash~~non-cash financial write-downs such as impairments. As of March 31, ~~2021,~~2022, Devon was in compliance with this covenant with a debt-to-capitalization ratio of ~~27.4%~~24.7%.

~~Retirement of Senior Notes~~

In first quarter of 2021, Devon redeemed $43 million of the 6.00% senior notes 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.

Net Financing Costs

The following schedule includes the components of net financing costs.


	Three Months Ended March 31,
	2022			2021
Interest based on debt outstanding	$	92		$	105
Gain on early retirement of debt		—			(20	)
Interest income		(1	)		(1	)
Other		(6	)		(7	)
Total net financing costs	$	85		$	77

Three Months Ended March 31,

2021

2020

Interest based on debt outstanding

$
105

$
65

Gain on early retirement of debt

(20
)

—

Interest income

(1
)

(5
)
Other

(7
)

5

Total net financing costs

$
77

$
65

14. Leases

~~14.~~Le~~ases~~

The following table presents Devon’s right-of-use assets and lease liabilities as of March 31, ~~2021~~2022 and December 31, ~~2020.~~2021.


	March 31, 2021						December 31, 2020						March 31, 2022						December 31, 2021
	Finance		Operating		Total		Finance		Operating		Total		Finance		Operating		Total		Finance		Operating		Total
Right-of-use assets	$	217	$	38	$	255	$	220	$	3	$	223	$	209	$	20	$	229	$	211	$	24	$	235
Lease liabilities:
Current lease liabilities ⁽¹⁾	$	8	$	23	$	31	$	8	$	1	$	9	$	8	$	15	$	23	$	8	$	18	$	26
Long-term lease liabilities		244		16		260		244		2		246		247		4		251		247		5		252
Total lease liabilities	$	252	$	39	$	291	$	252	$	3	$	255	$	255	$	19	$	274	$	255	$	23	$	278

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

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

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

During the first quarter of 2022, Devon reduced its asset retirement obligations by $35 million primarily due to extended retirement dates for oil and gas assets, partially offset by inflation-driven increases to current settlement costs.

On October 1, 2020, Devon completed the sale of its Barnett Shale assets to BKV for proceeds, net of purchase price adjustments, 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 commenced on January 1, 2021 and has a term of four years. The valuation of the future contingent earnout payments included within other current assets in the March 31, 2021 balance sheet was $66 million. The value was derived utilizing a Monte Carlo valuation model and qualifies as a level 3 fair value measurement.

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

Devon is party to various legal ~~proceedings and other matters that may result~~actions arising in ~~future payment obligations or other adverse consequences to~~connection with 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. ~~While~~None of the actions are believed by management ~~does not believe any current matter is~~to likely to involve future amounts that would be material to Devon’s financial position or results of operations after consideration of recorded ~~accruals, the ultimate outcome of such matters and the~~accruals. Actual amounts ~~involved~~ could differ materially from management’s ~~estimates~~estimates.

Numerous oil and natural gas producers and related parties, including Devon, have been named in various lawsuits alleging royalty underpayments. Devon is currently ~~defending against~~named as a defendant in a number of such lawsuits, ~~either as a named defendant~~including some lawsuits in which the ~~action or pursuant~~plaintiffs seek to ~~indemnity obligations for the benefit~~certify classes of ~~a third party. Plaintiffs in some of these lawsuits are seeking class certification.~~similarly situated plaintiffs. 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,~~paid royalty proceeds in an untimely manner without including required interest, used improper measurement techniques and entered into gas purchase and ~~midstream~~processing arrangements with affiliates that resulted in underpayment of royalties ~~or otherwise failed to prudently market~~in connection with oil, natural gas and NGLs produced and ~~sold and pay royalties on the highest obtainable price.~~sold. Devon is also involved in governmental agency proceedings and royalty audits and is subject to related contracts and regulatory controls in the ordinary course of business, some that may lead to additional royalty claims. As of March 31, 2022, Devon ~~does not currently believe that it is subject to material exposure with respect~~has accrued approximately $30 million in other current liabilities pertaining to such royalty matters.

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

Beginning in 2013, various parishes in Louisiana filed suit against numerous oil and gas companies, including Devon, alleging that the companies’ operations and activities in certain fields violated the State and Local Coastal Resource Management Act of 1978, as amended, and caused substantial environmental contamination, subsidence and other environmental damages to land and water 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~~intends to ~~be baseless and is~~ vigorously ~~defending~~defend against these claims.

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

The 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.~~platforms and related facilities. The government contends that an alleged corporate predecessor of Devon owned a partial interest in the subject lease and platforms. Although Devon cannot predict the ultimate outcome of this matter, Devon denies any obligation to decommission the subject platforms, has appealed the order, and believes any decommissioning obligation related to the subject platforms should be assumed by others.

The following table provides carrying value and fair value measurement information for certain of Devon’s financial assets and liabilities. The carrying values of cash, accounts receivable, other current receivables, accounts payable, other current payables, accrued expenses and lease liabilities included in the accompanying consolidated balance sheets approximated fair value at March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, as applicable. Therefore, such financial assets and liabilities are not presented in the following ~~table~~table.

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 in an established market. The fair values of its debt are estimated based on rates available for debt with similar terms and maturity when active trading is not available.

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, ~~2021~~2022 compared to previous periods and in our financial condition and liquidity since December 31, ~~2020.~~2021. For information regarding our critical accounting policies and estimates, see our ~~2020~~2021 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 2020. The COVID-19 team has 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~~Executive Overview ~~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~~helped us become a leading unconventional oil producer in the U.S., with an asset base underpinned by premium acreage in the economic core of the Delaware Basin. This strategic combination ~~accelerates~~accelerated 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~~moderating growth, ~~while capturing~~emphasizing capital efficiencies, maintaining and improving operational and corporate synergies, reducing reinvestment rates to maximize free cash flow, maintaining low leverage, delivering cash returns to our shareholders and pursuing ESG excellence. Our recent performance highlights for these priorities include the following items:

•

~~Exited the first quarter with $4.9 billion of liquidity, including $1.9 billion of cash, with no debt maturities until 2023.~~

•

Including variable dividends, paid dividends of approximately $667 million in the first quarter of 2022 and have declared $838 million of dividends to be paid in the second quarter of 2022.

•

~~Including our first variable dividend, paid dividends of $0.30 per share for approximately $203 million in the first quarter.~~

~~Overview of 2021 Results~~

We ~~operate under a disciplined returns-driven strategy focused on~~ remain committed to capital discipline and delivering ~~strong operational results, financial strength~~the objectives that underpin our current plan. Those objectives prioritize value creation through moderated capital investment and ~~value to our shareholders and continuing our commitment to environmental, social and governance excellence,~~ ~~which~~ ~~provides us~~production growth, particularly with a ~~strong foundation~~view of the steep backwardation in commodity prices, supply chain constraints and the economic uncertainty arising from recent geopolitical events.

Commodity prices strengthened throughout 2021 and oil prices continued to ~~grow returns, margin~~increase in the first quarter of 2022, which has significantly improved our earnings and ~~profitability.~~ ~~We continue~~cash flow generation. The increase in commodity prices during 2021 was primarily driven by increased demand resulting from the initial recovery from the COVID-19 pandemic, as well as OPEC+ and other oil and natural gas producers not rapidly increasing production levels. The military conflict between Russia and Ukraine and related economic sanctions imposed on Russia has further exacerbated supply shortages, causing oil prices to ~~execute on our strategy and navigate through~~increase even more during 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.~~first quarter of 2022.

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.

Table of Contents

Our earnings decreased from the fourth quarter of 2021 to the first quarter of 2022 primarily due to non-cash adjustments related to the value of commodity hedges, lower sold volumes resulting from natural declines and winter weather downtime and lower gas prices. Henry Hub decreased 15% from the fourth quarter of 2021 to the first quarter of 2022. These decreases were partially offset by a 23% increase in WTI from the fourth quarter of 2021 to the first quarter of 2022 which contributed to a 16% increase in our unhedged combined realized prices.

Our net earnings in recent quarters have been significantly impacted by ~~divestiture transactions, asset impairments and temporary,~~ 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~~2021 and the first quarter of 2022 each included a hedge valuation loss, net of tax of $0.2 billion, ~~$0.1 billion, $0.1~~$0.3 billion and ~~$0.5~~$0.3 billion, respectively. Net earnings in the ~~first~~fourth quarter of ~~2020~~2021 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.~~tax of $0.4 billion. Excluding these amounts, our core earnings have been more stable over recent quarters ~~but~~and continue to ~~be heavily influenced by~~trend upward while remaining sensitive to volatile commodity prices.

Despite our portfolio enhancements, aggressive cost reductions and operational advancements, our financial results have been challenged by commodity prices and deterioration of the macro-economic environment resulting from the unprecedented COVID-19 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 increased from the fourth quarter of 2020 to the first quarter of 2021 due to an increase in overall commodity prices as well as higher volumes resulting from the Merger. Led by a 36% increase in WTI from the fourth quarter of 2020 to the first quarter of 2021, our unhedged combined realized price rose 55%. These increases were partially offset by impacts related to 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, and operating cash flows have been impacted by the COVID-19 pandemic and its impact on commodity prices.~~ Our cash flow ~~increased during~~and EBITDAX have continued to trend upward primarily due to improved commodity prices and overall market conditions as well as strong operating performance. However, volumes were down slightly in the first quarter of ~~2021~~2022 primarily due to ~~higher commodity prices and~~natural declines across the ~~positive effects of the Merger.~~asset portfolio as well as downtime related to winter weather which negatively impacted earnings.

We exited the first quarter of ~~2021~~2022 with ~~$4.9~~$5.6 billion of liquidity, comprised of ~~$1.9~~$2.6 billion of cash and $3.0 billion of available credit under our Senior Credit Facility. We currently have ~~$7.0~~$6.5 billion of debt outstanding with no maturities until ~~the latter half of~~

~~Table of Contents~~

August 2023. We currently have approximately ~~50%~~25% and ~~60%~~35% of our ~~2021~~anticipated 2022 oil and gas production 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 indices. Additionally, we have entered into regional basis swaps in an effort to protect price realizations across our portfolio.

As commodity prices and our operating performance strengthen and bolster our financial condition, we have authorized opportunistic repurchases of up to $2.0 billion of our common shares with an expiration date of May 4, 2023. We repurchased approximately 4.0 million shares in the first quarter of 2022 for approximately $230 million, or $57.74 per share. As of March 31, 2022, we have repurchased approximately 18 million shares for approximately $819 million, or $45.61 per share, since the inception of the program. Additionally, we continue funding our fixed plus variable dividends, which totaled $667 million in the first quarter of 2022. We recently declared a dividend payable in the second quarter of 2022 for $838 million.

Table of Contents

Results of Operations

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

~~Continuing Operations~~

Q1 ~~2021~~2022 vs. Q4 ~~2020~~2021

Our first quarter ~~2021~~2022 net earnings were ~~$216~~$995 million, compared to a net ~~loss~~earnings of ~~$73 million~~$1.5 billion for the fourth quarter of ~~2020.~~2021. The graph below shows the change in ~~the~~ net earnings ~~(loss)~~ from the fourth quarter of ~~2020~~2021 to the first quarter of ~~2021.~~2022. The material changes are further discussed by category on the following pages.

Production Volumes


	Q1 2022		% of Total			Q4 2021		Change
Oil (MBbls/d)
Delaware Basin		209		73	%		213		-2	%
Anadarko Basin		14		5	%		14		2	%
Williston Basin		32		11	%		36		-12	%
Eagle Ford		17		6	%		19		-11	%
Powder River Basin		12		4	%		14		-9	%
Other		4		1	%		4		-9	%
Total		288		100	%		300		-4	%


	Q1 2022		% of Total			Q4 2021		Change
Gas (MMcf/d)
Delaware Basin		561		62	%		577		-3	%
Anadarko Basin		210		23	%		222		-5	%
Williston Basin		54		6	%		64		-15	%
Eagle Ford		61		7	%		60		3	%
Powder River Basin		19		2	%		19		-3	%
Other		1		0	%		1		-4	%
Total		906		100	%		943		-4	%


	Q1 2022		% of Total			Q4 2021		Change
NGLs (MBbls/d)
Delaware Basin		92		67	%		107		-14	%
Anadarko Basin		25		19	%		27		-4	%
Williston Basin		8		6	%		9		-16	%
Eagle Ford		9		6	%		9		-1	%
Powder River Basin		2		2	%		2		-10	%
Other		—		0	%		—	N/M
Total		136		100	%		154		-12	%

Table of Contents

~~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
%


	Q1 2022		% of Total			Q4 2021		Change
Combined (MBoe/d)
Delaware Basin		394		69	%		416		-5	%
Anadarko Basin		75		13	%		78		-4	%
Williston Basin		48		8	%		55		-13	%
Eagle Ford		36		6	%		38		-5	%
Powder River Basin		18		3	%		19		-7	%
Other		4		1	%		5		-11	%
Total		575		100	%		611		-6	%

From the fourth quarter of ~~2020~~2021 to the first quarter of ~~2021,~~2022, the change in volumes contributed to a ~~$445~~$220 million ~~increase~~decrease in earnings. ~~Due~~The decrease in volumes was primarily due to natural declines across the ~~Merger closing on January 7, 2021, volumes now include WPX legacy assets~~asset portfolio as well as downtime 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. The increase in volumes associated with the Merger were partially offset by impacts of the February 2021related to winter ~~storm. Volumes in the second quarter are expected to range from approximately 538 to 561 MBoe/d.~~

~~Field Prices~~

Q1 2021

Realization

Q4 2020

Change

Oil (per Bbl)

WTI index

$
57.87

$
42.65

+36
%
Realized price, unhedged

$
56.36

97%

$
39.84

+41
%
Cash settlements

$
(9.13
)

$
(1.83
)

Realized price, with hedges

$
47.23

82%

$
38.01

+24
%

Q1 2021

Realization

Q4 2020

Change

Gas (per Mcf)

Henry Hub index

$
2.71

$
2.67

+1
%
Realized price, unhedged

$
2.91

107%

$
1.96

+48
%
Cash settlements

$
(0.15
)

$
—

Realized price, with hedges

$
2.76

102%

$
1.96

+41
%

Q1 2021

Realization

Q4 2020

Change

NGLs (per Bbl)

Mont Belvieu blended index ⁽¹⁾

$
25.81

$
20.01

+29
%
Realized price, unhedged

$
25.01

97%

$
14.77

+69
%
Cash settlements

$
(0.20
)

$
(0.01
)

Realized price, with hedges

$
24.81

96%

$
14.76

+68
%

~~(1)Based upon composition of our NGL barrel.~~weather.

Q1 2021

Q4 2020

Change

Combined (per Boe)

Realized price, unhedged

$
39.84

$
25.63

+55
%
Cash settlements

$
(5.17
)

$
(0.86
)

Realized price, with hedges

$
34.67

$
24.77

+40
%

Realized Prices


	Q1 2022			Realization	Q4 2021			Change
Oil (per Bbl)
WTI index	$	94.45			$	76.91			23	%
Realized price, unhedged	$	92.94		98%	$	75.36			23	%
Cash settlements	$	(11.32	)		$	(13.14	)
Realized price, with hedges	$	81.62		86%	$	62.22			31	%


	Q1 2022			Realization	Q4 2021			Change
Gas (per Mcf)
Henry Hub index	$	4.96			$	5.84			-15	%
Realized price, unhedged	$	3.77		76%	$	4.68			-19	%
Cash settlements	$	(0.62	)		$	(1.42	)
Realized price, with hedges	$	3.15		64%	$	3.26			-3	%


	Q1 2022		Realization	Q4 2021			Change
NGLs (per Bbl)
WTI index	$	94.45		$	76.91			23	%
Realized price, unhedged	$	37.76	40%	$	35.36			7	%
Cash settlements	$	—		$	(0.54	)
Realized price, with hedges	$	37.76	40%	$	34.82			8	%


	Q1 2022			Q4 2021			Change
Combined (per Boe)
Realized price, unhedged	$	61.40		$	53.12			16	%
Cash settlements	$	(6.65	)	$	(8.78	)
Realized price, with hedges	$	54.75		$	44.34			23	%

From the fourth quarter of ~~2020~~2021 to the first quarter of ~~2021, field~~2022, realized prices contributed to a ~~$557~~$410 million increase in earnings. Unhedged realized oil ~~gas~~ and NGL prices increased primarily due to higher WTI ~~Henry Hub~~ and Mont Belvieu index ~~prices.~~prices while realized gas prices decreased slightly due to a lower Henry Hub index price. The increase in WTI and Mont Belvieu index prices was partially offset by ~~a decrease in~~ hedge cash settlements related to ~~all products.~~oil and gas commodities.

We currently have approximately ~~50%~~25% and 35% of our ~~2021~~anticipated 2022 oil ~~production hedged with an average floor price of $40/Bbl~~ and ~~approximately 60% of our 2021~~ gas production hedged, ~~with an average floor price~~respectively.

Table of ~~$2.56/Mcf. We are continuing to build our 2021~~Contents

Hedge Settlements


	Q1 2022			Q4 2021			Change
	Q
Oil	$	(293	)	$	(362	)		19	%
Natural gas		(51	)		(123	)		59	%
NGL		—			(8	)	N/M
Total cash settlements (1)	$	(344	)	$	(493	)		30	%

(1)

Included as a component of oil, gas and ~~2022 hedge positions at market prices.~~NGL derivatives on the consolidated statements of comprehensive earnings.

~~Hedge Settlements~~

Q1 2021

Q4 2020

Change

Q

Oil

$
(220
)

$
(27
)

- 715
%
Natural gas

(10
)

—

N/M

NGL

(2
)

—

N/M

Total cash settlements ⁽¹⁾

$
(232
)

$
(27
)

- 759
%

~~(1)~~

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

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

~~Table of Contents~~

Production Expenses


	Q1 2021			Q4 2020			Change			Q1 2022			Q4 2021			Change
LOE	$	199		$	91			+119	%	$	224		$	235			-5	%
Gathering, processing & transportation		160			130			+23	%		161			173			-7	%
Production taxes		117			47			+149	%		214			197			9	%
Property taxes		13			3			+333	%		19			—		N/M
Total	$	489		$	271			+80	%	$	618		$	605			2	%
Per Boe:
LOE	$	4.44		$	2.97			+49	%	$	4.33		$	4.18			4	%
Gathering, processing & transportation	$	3.57		$	4.23			- 16	%	$	3.11		$	3.08			1	%
Percent of oil, gas and NGL sales:
Production taxes		6.5	%		6.1	%		+8	%		6.7	%		6.6	%		2	%

Production expenses ~~increased~~remained relatively flat from the fourth quarter of ~~2020~~2021 to the first quarter of ~~2021 primarily due to the Merger closing on January 7, 2021. Partially offsetting increases to~~2022. LOE and gathering, processing and transportation ~~costs were approximately $20 million of Anadarko volume commitments which expired at the end of 2020. LOE per Boe increased~~expenses decreased primarily due to ~~a different post-Merger asset mix as well as impacts~~lower volumes which was offset by an increase in property taxes and production taxes which resulted from ~~the February 2021 winter storm. Production taxes also increased due to the rise in~~higher commodity prices.

Field-Level Cash Margin

The table below presents the field-level cash margin for each of our operating areas. Field-level cash margin is computed as oil, gas and NGL sales less production expenses and is not ~~prepared in accordance with~~a measure defined by GAAP. A reconciliation to the comparable GAAP measures is found in “Non-GAAP Measures” in this Item 2. The changes in production volumes, ~~field~~realized prices and production expenses, shown above, had the following impact on our field-level cash margins by asset.

	Q1 2021		$ per BOE		Q4 2020		$ per BOE
Field-level cash margin (non-GAAP)
									Q1 2022		$ per BOE		Q4 2021		$ per BOE
Field-level cash margin (Non-GAAP)
Delaware Basin	$	895	$	32.07	$	344	$	20.08	$	1,877	$	52.99	$	1,706	$	44.59
Anadarko Basin		85	$	14.01		61	$	8.28		204	$	30.31		212	$	29.65
Williston Basin		161	$	29.70		—	N/M			207	$	47.65		209	$	40.95
Eagle Ford		72	$	26.57		58	$	17.13		158	$	48.92		149	$	42.70
Powder River Basin		67	$	31.99		38	$	18.69		86	$	54.32		80	$	45.61
Other		19	$	28.21		13	$	18.35		25	$	61.96		24	$	55.14
Total	$	1,299	$	28.95	$	514	$	16.77	$	2,557	$	49.45	$	2,380	$	42.37

DD&A


	Q1 2022		Q4 2021		Change
Oil and gas per Boe	$	8.95	$	9.79		-9	%

Oil and gas	$	463	$	550		-16	%
Other property and equipment		26		27		-3	%
Total	$	489	$	577		-15	%

DD&A decreased in the first quarter of 2022 primarily due to lower DD&A rates compared to 2021. The decrease in DD&A rates was primarily due to increases to oil, gas and ~~Asset Impairments~~NGL reserve estimates at December 31, 2021, resulting from higher prices.

Q1 2021

Q4 2020

Change

Oil and gas per Boe

$
9.78

$
9.04

+8
%

Oil and gas

$
439

$
278

+58
%

Other property and equipment

28

23

+20
%

Total

$
467

$
301

+55
%

Asset impairments

$
—

$
27

N/M

DD27

Table of Contents

General and Administrative Expense


	Q1 2022		Q4 2021		Change
G&A per Boe	$	1.82	$	1.70		7	%

Labor and benefits	$	58	$	58		0	%
Non-labor		36		37		-3	%
Total	$	94	$	95		-1	%

The G&A per BOE rate increased in the first quarter of ~~2021~~2022 primarily due to ~~the Merger closing on January 7, 2021. For additional information, see~~ lower volumes resulting from natural declines and winter weather downtime.~~Note 2~~ ~~in “Part I. Financial Information – Item 1. Financial Statements” in this report.~~

Other Items


	Q1 2022			Q4 2021			Change in earnings
Commodity hedge valuation changes (1)	$	(339	)	$	515		$	(854	)
Marketing and midstream operations		(4	)		—			(4	)
Exploration expenses		2			5			3
Asset dispositions		(1	)		(49	)		(48	)
Net financing costs		85			86			1
Restructuring and transaction costs		—			28			28
Other, net		(61	)		(2	)		59
							$	(815	)

~~General~~(1)

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

Q1 2021

Q4 2020

Change

G&A per Boe

$
2.40

$
2.65

- 10
%

Labor and benefits

$
72

$
49

+47
%
Non-labor

35

33

+6
%
Total

$
107

$
82

+30
%

~~Labor and benefits increased primarily due to the Merger closing on January 7, 2021. However, Devon’s G&A per Boe rate decreased nearly 10% due to synergies created by the Merger.~~

~~Other Items~~

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)~~

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

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

~~Net financing costs increased as a result of WPX debt assumed~~Asset dispositions in the ~~Merger, partially offset by a $20~~fourth quarter of 2021 includes $49 million ~~gain~~related to the re-valuation of contingent earnout payments associated with ~~our debt retirements in the first quarter of 2021.~~prior divestitures. For additional information, see Note 132 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,~~discussion on other, net, see Note 6 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Income Taxes

Q1 2021

Q4 2020

Current benefit

$
(5
)

$
(20
)
Deferred benefit

(243
)

(17
)
Total benefit

$
(248
)

$
(37
)
Effective income tax rate

763
%

33
%


	Q1 2022			Q4 2021
Current expense	$	103		$	1
Deferred expense		164			149
Total expense	$	267		$	150
Effective income tax rate		21	%		9	%

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

Our first quarter ~~2021~~2022 net earnings ~~was $216~~were $995 million, compared to a net ~~loss~~earnings of ~~$1.7 billion~~$216 million for the first quarter of ~~2020.~~2021. The graph below shows the change in ~~the~~ net earnings ~~(loss)~~ from the first quarter of ~~2020~~2022 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~~2021 to the first quarter of ~~2021,~~2022, the change in volumes contributed to a ~~$446~~$212 million increase in earnings. ~~Due~~The increase in volumes was primarily due to ~~the Merger closing on January 7, 2021, volumes now include WPX legacy assets~~continued development 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~~as well as increased activity in the ~~first quarter of 2021. Continued development of Devon legacy assets in the Delaware~~Anadarko Basin ~~also increased volumes.~~and Eagle Ford. These increases were partially offset by ~~impacts of~~lower volumes in the ~~February 2021 winter storm~~Williston Basin and ~~reduced activity across Devon’s remaining assets.~~Powder River Basin primarily due to natural declines.

Realized Prices


	Q1 2022			Realization	Q1 2021			Change
Oil (per Bbl)
WTI index	$	94.45			$	57.87			63	%
Realized price, unhedged	$	92.94		98%	$	55.28			68	%
Cash settlements	$	(11.32	)		$	(9.13	)
Realized price, with hedges	$	81.62		86%	$	46.15			77	%


	Q1 2022			Realization	Q1 2021			Change
Gas (per Mcf)
Henry Hub index	$	4.96			$	2.71			83	%
Realized price, unhedged	$	3.77		76%	$	2.84			33	%
Cash settlements	$	(0.62	)		$	(0.15	)
Realized price, with hedges	$	3.15		64%	$	2.69			17	%

~~Field Prices~~


	Q1 2022		Realization	Q1 2021			Change
NGLs (per Bbl)
WTI index	$	94.45		$	57.87			63	%
Realized price, unhedged	$	37.76	40%	$	25.01			51	%
Cash settlements	$	—		$	(0.20	)
Realized price, with hedges	$	37.76	40%	$	24.81			52	%

	Q1 2021			Realization	Q1 2020		Change
Oil (per Bbl)
WTI index	$	57.87			$	46.44		+25	%
										Q1 2022			Q1 2021			Change
Combined (per Boe)
Realized price, unhedged	$	56.36		97%	$	44.59		+26	%	$	61.40		$	39.14			57	%
Cash settlements	$	(9.13	)		$	5.14				$	(6.65	)	$	(5.17	)
Realized price, with hedges	$	47.23		82%	$	49.73		- 5	%	$	54.75		$	33.97			61	%

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~~2021 to the first quarter of ~~2021, field~~2022, realized prices contributed to a ~~$535 million~~$1.2 billion increase in earnings. Unhedged realized oil, gas and NGL prices increased primarily due to higher WTI, Henry Hub and Mont Belvieu index prices. The increase in index prices was partially offset by ~~a decrease in~~ hedge cash settlements related to ~~all products.~~oil and gas commodities.

Hedge Settlements


	Q1 2022			Q1 2021			Change
Oil	$	(293	)	$	(220	)		-33	%
Natural gas		(51	)		(10	)		-410	%
NGL		—			(2	)	N/M
Total cash settlements (1)	$	(344	)	$	(232	)		-48	%

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.

~~(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			Q1 2022			Q1 2021			Change
LOE	$	199		$	126			+58	%	$	224		$	199			13	%
Gathering, processing & transportation		160			130			+23	%		161			129			25	%
Production taxes		117			56			+109	%		214			117			83	%
Property taxes		13			6			+117	%		19			13			46	%
Total	$	489		$	318			+54	%	$	618		$	458			35	%
Per Boe:
LOE	$	4.44		$	3.96			+12	%	$	4.33		$	4.44			-3	%
Gathering, processing & transportation	$	3.57		$	4.11			- 13	%	$	3.11		$	2.87			8	%
Percent of oil, gas and NGL sales:
Production taxes		6.5	%		6.9	%		- 5	%		6.7	%		6.6	%		2	%

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. Productionhigher volumes as well as an increase in production taxes ~~also increased due to the rise in~~resulting from higher commodity prices.

Field-Level Cash Margin

	Q1 2021		$ per BOE		Q1 2020		$ per BOE
Field-level cash margin (non-GAAP)
									Q1 2022		$ per BOE		Q1 2021		$ per BOE
Field-level cash margin (Non-GAAP)
Delaware Basin	$	895	$	32.07	$	260	$	17.72	$	1,877	$	52.99	$	895	$	32.07
Anadarko Basin		85	$	14.01		74	$	8.22		204	$	30.31		85	$	14.01
Williston Basin		161	$	29.70		—	N/M			207	$	47.65		161	$	29.70
Eagle Ford		72	$	26.57		87	$	19.20		158	$	48.92		72	$	26.57
Powder River Basin		67	$	31.99		54	$	20.48		86	$	54.32		67	$	31.99
Other		19	$	28.21		14	$	15.55		25	$	61.96		19	$	28.21
Total	$	1,299	$	28.95	$	489	$	15.41	$	2,557	$	49.45	$	1,299	$	28.95

DD&A and Asset Impairments


	Q1 2021		Q1 2020		Change			Q1 2022		Q1 2021		Change
Oil and gas per Boe	$	9.78	$	11.90		- 18	%	$	8.95	$	9.78		-8	%

Oil and gas	$	439	$	377		+16	%	$	463	$	439		5	%
Other property and equipment		28		24		+18	%		26		28		-6	%
Total	$	467	$	401		+16	%	$	489	$	467		5	%

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~~higher volumes which was partially offset by lower DD&A rates. The decrease in ~~“Part I. Financial Information – Item 1. Financial Statements” in this report.~~

~~Asset impairments were $2.7 billion in the first quarter of 2020~~DD&A rates was primarily due to ~~significant decreases in commodity prices~~increases to oil, gas and NGL reserve estimates at December 31, 2021, resulting from higher prices.

General and Administrative Expense


	Q1 2022		Q1 2021		Change
G&A per Boe	$	1.82	$	2.40		-24	%

Labor and benefits	$	58	$	72		-19	%
Non-labor		36		35		3	%
Total	$	94	$	107		-12	%

General and administrative expenses decreased primarily due to synergies resulting 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.~~Merger.

Table of Contents

Other Items


	Q1 2022			Q1 2021			Change in earnings
Commodity hedge valuation changes (1)	$	(339	)	$	(296	)	$	(43	)
Marketing and midstream operations		(4	)		(21	)		17
Exploration expenses		2			3			1
Asset dispositions		(1	)		(32	)		(31	)
Net financing costs		85			77			(8	)
Restructuring and transaction costs		—			189			189
Other, net		(61	)		(29	)		32
							$	157

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.

~~(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~~Asset dispositions include $35 million in the first quarter of ~~2020.~~2021 related to the sale of non-core assets in the Rockies. For additional information, see Note 52 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Net financing costs include a $20 million gain in the first quarter of 2021 related to debt retirements. For additional information, see Note 13 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Restructuring and transaction costs in the first quarter of 2021 reflect workforce reductions in conjunction with the Merger, as well as various transaction costs related to the Merger. For additional information, see Note 5 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

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

Income Taxes

Q1 2021

Q1 2020

Current benefit

$
(5
)

$
(106
)
Deferred benefit

(243
)

(311
)
Total benefit

$
(248
)

$
(417
)
Effective income tax rate

763
%

20
%


	Q1 2022			Q1 2021
Current expense (benefit)	$	103		$	(5	)
Deferred expense (benefit)		164			(243	)
Total expense (benefit)	$	267		$	(248	)
Effective income tax rate		21	%		763	%

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

3632

Table of Contents

Capital Resources, Uses and Liquidity

Sources and Uses of Cash

The following table presents the major changes in cash and cash equivalents for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021.

	Three Months Ended March 31,
	2021			2020			Three Months Ended March 31,
Operating cash flow from continuing operations	$	592		$	529
							2022			2021
Operating cash flow							$	1,837		$	592
WPX acquired cash		344			—			—			344
Divestitures of property and equipment		15			25			26			15
Capital expenditures		(499	)		(425	)		(537	)		(499	)
Equity method investment activity, net								(14	)		10
Debt activity, net		(560	)		—			—			(560	)
Repurchases of common stock		—			(38	)		(211	)		—
Common stock dividends		(203	)		(34	)		(667	)		(203	)
Noncontrolling interest activity, net		(28	)		2			(8	)		(28	)
Other		(20	)		(21	)		(72	)		(30	)
Net change in cash, cash equivalents and restricted cash from discontinued operations		—			(155	)
Net change in cash, cash equivalents and restricted cash	$	(359	)	$	(117	)	$	354		$	(359	)
Cash, cash equivalents and restricted cash at end of period	$	1,878		$	1,727		$	2,625		$	1,878

Operating Cash Flow and WPX Acquired Cash

As presented in the table above, net cash provided by operating activities continued to be a significant source of capital and liquidity. Operating cash flow ~~grew 12%~~more than tripled during the three months ended March 31, ~~2021~~2022 compared to the three months ended March 31, ~~2020.~~2021. The increase was primarily due to ~~the Merger and~~significantly increased commodity prices ~~significantly increasing in~~as well as higher volumes for the first ~~quarter~~three months of 2022 compared to 2021. Despite our portfolio enhancements, aggressive cost reductions and operational advancements, our 2020 financial results were challenged by commodity prices and deterioration of the macro-economic environment resulting from the unprecedented COVID-19 pandemic.

Divestitures of Property and Equipment

During the first three months of 2022 and 2021, we received contingent consideration related to asset divestitures and sold non-core ~~U.S.~~ assets, ~~for approximately $15 million, net of customary purchase price adjustments.~~respectfully. For additional information, please see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Capital Expenditures

The amounts in the table below reflect cash payments for capital expenditures, including cash paid for capital expenditures incurred in prior periods.


	Three Months Ended March 31,				Three Months Ended March 31,
	2021		2020		2022		2021
Delaware Basin	$	397	$	221	$	395	$	397
Anadarko Basin		9		8		10		9
Williston Basin		28		—		23		28
Eagle Ford		14		94		26		14
Powder River Basin		33		85		33		33
Other		—		3		3		—
Total oil and gas		481		411		490		481
Midstream		5		8		29		5
Other		13		6		18		13
Total capital expenditures	$	499	$	425	$	537	$	499

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

~~Table of Contents~~

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 funding all of our capital expenditures for the three months ended March 31, 2021. Our capital investment program is driven by a disciplined allocation process focused on moderating our production growth and maximizing our returns. ~~Our~~As such, our 2022 capital expenditures ~~are expected~~represent approximately 30% of our operating cash flow.

Table of Contents

Equity Method Investments

During the first three months of 2022 and 2021, Devon received distributions from our equity method investments of $8 million and $10 million, respectively. Devon contributed $22 million to ~~range between $1.7 billion to $2.0 billion for~~our equity method investments during the ~~full year 2021.~~ first three months of 2022.

Debt Activity

Subsequent to the Merger closing, we redeemed ~~$43~~$533 million of ~~6.00% notes, $175 million of 5.875% notes and $315 million of 4.50%~~senior notes in the first quarter of 2021. We also paid $27 million of cash retirement costs related to these redemptions.

Shareholder Distributions and Stock Activity

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

We repurchased ~~2.2~~approximately 4.0 million shares of common stock for ~~$38~~$230 million in the first ~~three months~~quarter of ~~2020.~~2022 under the share repurchase program authorized by our Board of Directors. For additional information, see Note 1716 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

The following table summarizes our common stock dividends during the first quarter 2022 and 2021. In February 2022, our Board of Directors increased our fixed dividend rate by 45% to $0.16 per share. In addition to the fixed quarterly dividend, we paid a variable dividend of $0.84 per share in the first quarter of 2022 and $0.19 per share in the first quarter of 2021.


	Fixed		Variable		Total		Rate Per Share
2022:
First quarter	$	109	$	558	$	667	$	1.00
2021:
First quarter	$	76	$	127	$	203	$	0.30

Noncontrolling Interest Activity, net

During the first three months of 2022 and 2021, we ~~did not~~ ~~receive any contributions from our noncontrolling interests in CDM~~distributed $8 million and ~~distributed~~ $4 million, respectively, to our noncontrolling interests in CDM. In the first quarter of 2021, we paid $24 million to purchase the noncontrolling interest portion of a partnership that WPX had formed to acquire minerals in the Delaware Basin.

Liquidity

~~Liquidity~~

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

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 as well as accelerate our cash-return business model.

Operating Cash Flow

Key inputs into determining our planned capital investment isare the amount of cash we hold and operating cash flow we expect to generate over the next one to three or more years. At the end of the first quarter of ~~2021,~~2022, we held approximately ~~$1.9~~$2.6 billion of cash, inclusive of ~~$195~~approximately $150 million of cash restricted primarily for retained obligations related to divested assets. Our operating cash flow forecasts are sensitive to many variables and include a measure of uncertainty as ~~these variables~~actual results may differ from our expectations.

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

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To mitigate some of the risk inherent in prices, we utilize various derivative financial instruments to protect a portion of our production against downside price risk. We 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. The key terms to our oil, gas and NGL derivative financial instruments as of March 31, ~~2021~~2022 are presented in Note 3 in “Part I. Financial Information – Item 1. Financial Statements” of this report.

Further, when considering the current commodity price environment and our current hedge position, we expect to achieve our capital investment priorities. Additionally, ~~as commodity prices begin to recover from the COVID-19 pandemic,~~ we remain committed to ~~a maintenance~~ capital ~~program~~discipline and focused on delivering the objectives that underpin our capital plan for ~~the foreseeable future.~~2022. We ~~do not intend~~will continue to ~~add any growth projects until market fundamentals recover, excess inventory clears up~~prioritize economic value over growing volumes, which is driven partially by current commodity price backwardation, supply chain constraints and ~~OPEC+ curtailed volumes are effectively absorbed by the world markets.~~economic uncertainty arising from recent geopolitical events.

Operating Expenses – Commodity prices can also affect our operating cash flow through an indirect effect on operating expenses. Significant commodity price decreases can lead to a decrease in drilling and development activities. As a result, the demand and cost for people, services, equipment and materials may also decrease, causing a positive impact on our cash flow as the prices paid for services and equipment decline. However, the inverse is also generally true during periods of rising commodity prices.

~~Cost savings from synergies resulting from~~ Furthermore, the ~~Merger are expected~~COVID-19 pandemic has contributed to ~~be attained through cost reductions~~disruption and ~~efficiencies related~~volatility in our supply chain, which has resulted, and may continue to ~~our capital programs, G&A, financing~~result in labor shortages, increased 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~~delays for pipe and other materials needed for 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.operations.

Credit Losses – Our operating cash flow is also exposed to credit risk in a variety of ways. This includes the credit risk related to customers who purchase our oil, gas and NGL production, the collection of receivables from our joint interest ~~partners~~owners for their proportionate share of expenditures made on projects we operate and counterparties to our derivative financial contracts. We utilize a variety of mechanisms to limit our exposure to the credit risks of our customers, partners and counterparties. Such mechanisms include, under certain conditions, requiring letters of credit, prepayments or cash collateral postings.

~~Assumption and Repayment of WPX Debt~~

In conjunction with the Merger closing on January 7, 2021, we assumed a principal value of $3.3 billion of WPX debt. Subsequent to the Merger closing, we have reduced our debt by approximately $530 million in the first quarter of 2021. Additionally, we redeemed $210 million of 5.25% notes in April 2021. In May 2021, we gave notice to exercise our early redemption to fully retire the 5.75% senior notes due 2026 in June 2021. We expect these redemptions to lower our annual cash net financing costs by approximately $70 million.

Credit Availability

As of March 31, ~~2021,~~2022, we had approximately $3.0 billion of available borrowing capacity under our Senior Credit Facility. This credit facility supports our $3.0 billion of short-term credit under our commercial paper program. At March 31, ~~2021,~~2022, there were no borrowings under our commercial paper program, and we were in compliance with the Senior Credit Facility’s financial covenant.

Debt Ratings

We receive debt ratings from the major ratings agencies in the U.S. In determining our debt ratings, the agencies consider a number of qualitative and quantitative items including, but not limited to, commodity pricing levels, our liquidity, asset quality, reserve mix, debt levels, cost structure, planned asset sales and production growth opportunities. Our credit rating from Standard and Poor’s Financial Services is ~~BBB-~~BBB with a stable outlook. Our credit rating from Fitch is ~~BBB~~BBB+ with a ~~positive~~stable outlook. Our credit rating from Moody’s Investor Service is ~~Ba1~~Baa3 with a ~~positive~~stable outlook. Any rating downgrades may result in additional letters of credit or cash collateral being posted under certain contractual arrangements.

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

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Fixed Plus Variable Dividend

~~Following the closing of the Merger, Devon initiated~~We are committed to a ~~new~~ “fixed plus variable” dividend strategy. ~~The fixed dividend is currently paid quarterly at a rate of $0.11 per share, and the~~Our Board of Directors will consider a number of factors when setting the quarterly dividend, if any, including a general target of paying out approximately 10% of operating cash flow through the fixed dividend. In February 2022, our Board of Directors increased our quarterly fixed dividend rate by 45% to $0.16 per share. In addition to the fixed quarterly dividend, ~~Devon~~we may pay a variable dividend up to ~~50 percent~~50% of ~~its~~our excess free cash flow, which is a non-GAAP measure. Each quarter’s excess free cash flow is computed as operating cash flow (a GAAP measure) before balance sheet changes, less capital expenditures and the fixed dividend. The declaration and payment of any future dividend, whether fixed or variable, will remain at the full discretion of our Board of Directors and will depend on ~~Devon’s~~our financial results, cash requirements, future prospects ~~COVID-19 impacts~~ and other factors deemed relevant by the Board.

In May ~~2021,~~2022, Devon announced a cash dividend in the amount of ~~$0.34~~$1.27 per share payable in the second quarter of ~~2021.~~2022. The dividend consists of a fixed quarterly dividend in the amount of approximately ~~$74~~$106 million (or ~~$0.11~~$0.16 per share) and a variable quarterly dividend in the amount of approximately ~~$155~~$732 million (or ~~$0.23~~$1.11 per share).

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Share Repurchases

In May 2022, our Board of Directors increased our share repurchase program by $0.4 billion to a total authorized amount of $2.0 billion, and extended the expiration date to May 4, 2023. Through April 29, 2022, we had executed $891 million of the authorized program.

Capital Expenditures

Our ~~2021~~2022 exploration and development budget for the remainder of ~~2021~~2022 is expected to range from approximately ~~$1.1~~$1.4 billion to ~~$1.3~~$1.7 billion.

Critical Accounting Estimates

Income Taxes

The amount of income taxes recorded requires interpretations of complex rules and regulations of federal, state, provincial and foreign tax jurisdictions. We recognize current tax expense based on estimated taxable income for the current period and the applicable statutory tax rates. We routinely assess potential uncertain tax positions and, if required, estimate and establish accruals for such amounts. We have recognized deferred tax assets and liabilities for temporary differences, operating losses and other tax carryforwards. We routinely assess our deferred tax assets and reduce such assets by a valuation allowance if we deem it is more likely than not that some portion or all of the deferred tax assets will not be realized. ~~Due primarily to significant cumulative losses, we recorded a full valuation allowance against U.S. deferred tax assets in 2020 and remain in a full valuation allowance 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 operating losses and tax credits generated prior to the ownership change may be limited. Generally, an “ownership change” occurs if one or more shareholders, each of whom owns five percent or more in value of a corporation’s stock, increase their aggregate percentage ownership by more than 50 percent over the lowest percentage of stock owned by those shareholders at any time during the preceding three-year period. NoBased on currently available information, we do not believe an ownership change has occurred during ~~2021~~2022 for Devon, but the Merger did cause an ownership change for WPX and increased the likelihood Devon could experience an ownership change over the next ~~three~~two years.

~~Purchase Accounting~~

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 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.

We made a number of assumptions in estimating the fair value of assets acquired and liabilities assumed in 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 inherent in these estimates and include, among other things, estimates of reserve quantities, estimates of future commodity prices, 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 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 Devon’s financial statements. A higher fair value ascribed to a property results in higher DD&A expense, which results in lower net

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earnings. Fair values are based on estimates of future commodity prices, reserve quantities, development costs and operating costs. In the event that future commodity prices or reserve quantities are lower than those used as inputs to determine estimates of acquisition date fair values, the likelihood increases that certain costs may be determined to not be recoverable.

In addition to the fair value of proved and unproved oil and gas properties, other significant fair value assessments for the assets acquired and liabilities assumed in the Merger relate to debt, the equity method investment in Catalyst Midstream and out-of-market contract assets and liabilities. The fair value of the 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 estimate of an applicable market participant discount rate. The fair value of assumed out-of-market contract assets and liabilities associated with longer-term marketing, gathering, processing and transportation contracts included significant judgements and assumptions related to determining the market rates, estimates of future reserves and production associated with the respective contracts and applying an applicable market participant discount rate.

For additional information regarding our critical accounting policies and estimates, see our ~~2020~~2021 Annual Report on Form 10-K.

Non-GAAP Measures

We make reference to “core earnings ~~(loss)~~ attributable to Devon” and “core earnings ~~(loss)~~ per share attributable to Devon” in ~~“Overview of 2021 Results”~~“Executive Overview” in this Item 2 that are not required by or presented in accordance with GAAP. These non-GAAP measures are not alternatives to GAAP measures and should not be considered in isolation or as a substitute for analysis of our results reported under GAAP. Core earnings ~~(loss)~~ attributable to Devon, as well as the per share amount, represent net earnings excluding certain non-cash and other items that are typically excluded by securities analysts in their published estimates of our financial results. Our non-GAAP measures are typically used as a quarterly performance measure. Amounts excluded relate to asset dispositions, non-cash asset impairments (including non-cash unproved asset impairments), deferred tax asset valuation allowance, fair value changes in derivative financial instruments and foreign currency, costs associated with early retirement of debt~~fair value changes in derivative financial instruments, changes in tax legislation~~ and restructuring and transaction costs associated with the workforce reductions described further in Note 65.

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

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

Three Months Ended March 31,

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
)
Adjustments:

Asset and exploration impairments

2,776

2,146

2,146

5.66

Deferred tax asset valuation allowance

—

108

108

0.28

Fair value changes in financial instruments

(619
)

(479
)

(479
)

(1.24
)
Change in tax legislation

—

(62
)

(62
)

(0.16
)
Core earnings attributable to Devon (Non-GAAP)
$
50

$
23

$
22

$
0.06

Discontinued Operations

Loss attributable to Devon (GAAP)
$
(157
)

$
(125
)

$
(125
)

$
(0.34
)
Adjustments:

Asset impairments

179

141

141

0.38

Fair value changes in foreign currency and other

10

10

10

0.03

Core earnings attributable to Devon (Non-GAAP)
$
32

$
26

$
26

$
0.07

Total

Loss attributable to Devon (GAAP)
$
(2,264
)

$
(1,815
)

$
(1,816
)

$
(4.82
)
Adjustments:

Continuing Operations

2,157

1,713

1,713

4.54

Discontinued Operations

189

151

151

0.41

Core earnings attributable to Devon (Non-GAAP)
$
82

$
49

$
48

$
0.13


	Three Months Ended March 31,
	Before Tax			After Tax			After Noncontrolling Interests			Per Diluted Share
2022
Earnings attributable to Devon (GAAP)	$	1,262		$	995		$	989		$	1.48
Adjustments:
Asset dispositions		(1	)		—			—			—
Deferred tax asset valuation allowance		—			6			6			0.01
Fair value changes in financial instruments		338			260			260			0.39
Core earnings attributable to Devon (Non-GAAP)	$	1,599		$	1,261		$	1,255		$	1.88
2021
Earnings (loss) attributable to Devon (GAAP)	$	(32	)	$	216		$	213		$	0.32
Adjustments:
Asset dispositions		(32	)		(24	)		(24	)		(0.04	)
Asset and exploration impairments		1			—			—			—
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

EBITDAX and Field-Level Cash Margin

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

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

	Three Months Ended March 31,
	2021			2020			Three Months Ended March 31,
Net earnings (loss) (GAAP)	$	216		$	(1,815	)
Net loss from discontinued operations, net of tax		—			125
							2022			2021
Net earnings (GAAP)							$	995		$	216
Financing costs, net		77			65			85			77
Income tax benefit		(248	)		(417	)
Income tax expense (benefit)								267			(248	)
Exploration expenses		3			112			2			3
Depreciation, depletion and amortization		467			401			489			467
Asset impairments		—			2,666
Asset dispositions		(32	)		—			(1	)		(32	)
Share-based compensation		20			20			20			20
Derivative and financial instrument non-cash valuation changes		296			(619	)		339			296
Restructuring and transaction costs		189			—			—			189
Accretion on discounted liabilities and other		(29	)		(48	)		(61	)		(29	)
EBITDAX (non-GAAP)		959			490
EBITDAX (Non-GAAP)								2,135			959
Marketing and midstream revenues and expenses, net		21			18			4			21
Commodity derivative cash settlements		232			(101	)		344			232
General and administrative expenses, cash-based		87			82			74			87
Field-level cash margin (non-GAAP)	$	1,299		$	489
Field-level cash margin (Non-GAAP)							$	2,557		$	1,299

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Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Commodity Price Risk

As of March 31, ~~2021,~~2022, we have commodity derivatives that pertain to a portion of our estimated production for the last nine months of ~~2021,~~2022, as well as for ~~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, ~~2021,~~2022, a 10% change in the forward curves associated with our commodity derivative instruments would have changed our net positions by approximately ~~$335~~$225 million.

Interest Rate Risk

As of March 31, ~~2021,~~2022, we had total debt of ~~$7.3~~$6.5 billion. All of our debt is based on fixed interest rates averaging ~~5.6%~~5.8%.

Foreign Currency Risk

We had no material foreign currency risk at March 31, ~~2021.~~2022.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

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

Based on their evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of March 31, ~~2021~~2022 to ensure that the information required to be disclosed by Devon in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.

Changes in Internal Control Over Financial Reporting

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.

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Table of Contents

PART II. Other Information

Item 1. Legal Proceedings

We are involved in various legal proceedings incidental to our business. However, to our knowledge as of the date of this report and subject to the ~~matter~~environmental matters noted ~~below,~~in Part I, Item 3. Legal Proceedings of our 2021 Annual Report on Form 10-K, there were no material pending legal proceedings to which we are a party or to which any of our property is subject.

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.

Please see our ~~2020~~2021 Annual Report on Form 10-K and other SEC filings for additional information.

Item 1A. Risk Factors

There have been no material changes to the information included in Item 1A. “Risk Factors” in our ~~2020~~2021 Annual Report on Form 10-K.

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

The following table provides information regarding purchases of our common stock that were made by us during the first quarter of ~~2021~~2022 (shares in thousands).


Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs (2)		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
January 1 - January 31		10	$	48.58		—	$	411
February 1 - February 28		1,872	$	52.34		888	$	964
March 1 - March 31		3,494	$	59.25		3,091	$	781
Total		5,376	$	56.82		3,979

Period

Total Number of
Shares Purchased ⁽¹⁾

Average Price
Paid per Share

January 1 - January 31

15

$
18.29

February 1 - February 28

1,011

$
19.30

March 1 - March 31

798

$
22.92

Total

1,824

$
20.87

(1)

In addition to shares purchased under the share repurchase program described below, these amounts also include approximately 1.4 million shares received by us from employees for the payment of personal income tax withholdings on vesting transactions.

~~(1)~~(2)

On November 2, 2021, we announced a $1.0 billion share repurchase program with an expiration date of December 31, 2022. In February 2022, we announced the expansion of this program to $1.6 billion, and in May 2022, we announced a further expansion to $2.0 billion and extended the expiration date to May 4, 2023. In the first quarter of 2022, we repurchased 4.0 million common shares for $230 million, or $57.74 per share, under this share repurchase program. For additional information, see Note 16 in “Part I. Financial Information – Item 1. Financial Statements” in this report

~~These amounts reflect the shares received by us from employees for the payment of personal income tax withholding on vesting transactions.~~

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	1311
	Note 4 – Share-Based Compensation	1513
	Note 5 – ~~Asset Impairments~~Restructuring and Transaction Costs	1614
	Note 6 – ~~Restructuring and Transaction Costs~~ Other, Net	1715
	Note 7 – Income Taxes	1816
	Note 8 – Net Earnings ~~(Loss)~~ Per Share ~~From Continuing Operations~~	1916
	Note 9 – Other Comprehensive Earnings (Loss)	1917
	Note 10 – Supplemental Information to Statements of Cash Flows	2017
	Note 11 – Accounts Receivable	2017
	Note 12 – Property, Plant and Equipment	2018
	Note 13 – Debt and Related Expenses	2118
	Note 14 – Leases	2219
	Note 15 – Asset Retirement Obligations	2219
	Note 16 – ~~Other Long-Term Liabilities~~Stockholders’ Equity	2320
	Note 17 ~~– Stockholders’ Equity~~	23
	~~Note 18 – Discontinued Operations~~	24
	~~Note 19~~ – Commitments and Contingencies	2520
	Note 2018 – Fair Value Measurements	2622
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2823
~~Item 3.~~	Executive Overview	23
	Results of Operations	25
	Capital Resources, Uses and Liquidity	33
	Critical Accounting Estimates	36
	Non-GAAP Measures	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4439
Item 4.	Controls and Procedures	4439

Part II. Other Information
Item 1.	Legal Proceedings	4540
Item 1A.	Risk Factors	4540
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4540
Item 3.	Defaults Upon Senior Securities	4540
Item 4.	Mine Safety Disclosures	4540
Item 5.	Other Information	4540
Item 6.	Exhibits	4641

Signatures		4742

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


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


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


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


		Carrying Amount
Investments	% Interest	March 31, 2022		December 31, 2021
Catalyst	50%	$	361	$	368
Other	Various		55		34
Total		$	416	$	402

	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

	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		—	$	—

	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		—	$	—

		Price Swaps
Period	Product	Volume (Bbls/d)		Weighted Average Price ($/Bbl)
Q2-Q4 2021	Natural Gasoline		1,000	$	47.57
Q2-Q4 2021	Normal Butane		1,000	$	31.40
Q2-Q4 2021	Propane		1,000	$	27.88

	March 31, 2021		December 31, 2020
Commodity derivative assets:
Other current assets	$	3	$	5
Other long-term assets		3		1
Total derivative assets	$	6	$	6
Commodity derivative liabilities:
Other current liabilities	$	667	$	143
Other long-term liabilities		122		5
Total derivative liabilities	$	789	$	148

						Performance-Based					Performance
	Restricted Stock Awards & Units					Restricted Stock Awards					Share Units
	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)
Unvested at 12/31/20		5,316		$	25.82		44		$	44.70		1,994				$	31.89
Granted ⁽¹⁾		5,542		$	18.71		—		$	—		861				$	18.08
Vested		(4,329	)	$	22.63		(39	)	$	45.41		(754	)			$	37.40
Forfeited		(20	)	$	24.79		—		$	—		(25	)			$	36.04
Unvested at 3/31/21		6,509		$	21.89		5		$	38.54		2,076		⁽²	⁾	$	24.12

	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
5.75% due June 1, 2026 ⁽¹⁾		500			—
7.50% due September 15, 2027		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
7.95% due April 15, 2032		366			366
5.60% due July 15, 2041		1,250			1,250
4.75% due May 15, 2042		750			750
5.00% due June 15, 2045		750			750
Net premium (discount) on debentures and notes		226			(20	)
Debt issuance costs		(31	)		(31	)
Total debt	$	7,268		$	4,298
Less amount classified as short-term debt		226			—
Total long-term debt	$	7,042		$	4,298

	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

	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

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

First quarter 2020		2,243	$	38	$	16.85
Total		2,243	$	38	$	16.85

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


							Fair Value Measurements Using:
	Carrying			Total Fair			Level 1		Level 2			Level 3
	Amount			Value			Inputs		Inputs			Inputs
March 31, 2022 assets (liabilities):
Cash equivalents	$	2,196		$	2,196		$	2,196	$	—		$	—
Commodity derivatives	$	32		$	32		$	—	$	32		$	—
Commodity derivatives	$	(940	)	$	(940	)	$	—	$	(940	)	$	—
Debt	$	(6,471	)	$	(7,126	)	$	—	$	(7,126	)	$	—
Contingent earnout payments	$	115		$	115		$	—	$	—		$	115
December 31, 2021 assets (liabilities):
Cash equivalents	$	1,421		$	1,421		$	1,421	$	—		$	—
Commodity derivatives	$	8		$	8		$	—	$	8		$	—
Commodity derivatives	$	(577	)	$	(577	)	$	—	$	(577	)	$	—
Debt	$	(6,482	)	$	(7,644	)	$	—	$	(7,644	)	$	—
Contingent earnout payments	$	184		$	184		$	—	$	—		$	184

	Q1 2021			Q4 2020
Current benefit	$	(5	)	$	(20	)
Deferred benefit		(243	)		(17	)
Total benefit	$	(248	)	$	(37	)
Effective income tax rate		763	%		33	%

Period	Total Number of Shares Purchased ⁽¹⁾		Average Price Paid per Share
January 1 - January 31		15	$	18.29
February 1 - February 28		1,011	$	19.30
March 1 - March 31		798	$	22.92
Total		1,824	$	20.87

~~Exhibit~~ ~~Number~~		~~Description~~
Exhibit Number
~~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~~).Description

~~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*	~~2021~~2022 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.

10.2*	~~2021~~2022 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.

10.3*	~~2021 Amendment (effective as of January 7, 2021) to the~~Employment Agreement, dated March 2, 2022, by and between Devon Energy Corporation ~~2017 Long-Term Incentive Plan~~and Ms. Tana K. Cashion (incorporated by reference to Exhibit ~~10.7~~10.1 to Registrant’s Form ~~10-K~~8-K filed ~~February 17, 2021;~~March 7, 2022; 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 (incorporated by reference to Exhibit 10.4 to Registrant’s Form 8-K filed January 7, 2021; File No. 001-32318~~31.1).

10.6*	~~Employment Agreement, dated January 7, 2021, by and between Registrant and 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).

*	Indicates management contract or compensatory plan or arrangement.


				DEVON ENERGY CORPORATION

Date: May ~~5, 2021~~3, 2022				/s/ Jeremy D. Humphers
				Jeremy D. Humphers
				Senior Vice President and Chief Accounting Officer