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,~~October 20, 2021, ~~676.9~~677.0 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 this 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.~~

~~“Federal Funds Rate” means the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.~~environmental, social and governance.

“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.

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020
	(Unaudited)						(Unaudited)
Oil, gas and NGL sales	$	1,788		$	807		$	2,635		$	678		$	6,546		$	1,909
Oil, gas and NGL derivatives		(528	)		720			(335	)		(87	)		(1,566	)		272
Marketing and midstream revenues		502			560			1,166			476			2,953			1,367
Total revenues		1,762			2,087			3,466			1,067			7,933			3,548
Production expenses		489			318			555			271			1,526			852
Exploration expenses		3			112			3			39			9			163
Marketing and midstream expenses		523			578			1,165			478			2,972			1,395
Depreciation, depletion and amortization		467			401			578			299			1,581			999
Asset impairments		—			2,666			—			—			—			2,666
Asset dispositions		(32	)		—			—			—			(119	)		—
General and administrative expenses		107			102			95			75			296			256
Financing costs, net		77			65			86			66			243			200
Restructuring and transaction costs		189			—			18			32			230			32
Other, net		(29	)		(48	)		2			—		��	(41	)		(35	)
Total expenses		1,794			4,194			2,502			1,260			6,697			6,528
Loss from continuing operations before income taxes		(32	)		(2,107	)
Income tax benefit		(248	)		(417	)
Earnings (loss) from continuing operations before income taxes								964			(193	)		1,236			(2,980	)
Income tax expense (benefit)								120			(90	)		(85	)		(510	)
Net earnings (loss) from continuing operations		216			(1,690	)		844			(103	)		1,321			(2,470	)
Net loss from discontinued operations, net of income taxes		—			(125	)
Net earnings (loss) from discontinued operations, net of income taxes								—			13			—			(103	)
Net earnings (loss)		216			(1,815	)		844			(90	)		1,321			(2,573	)
Net earnings attributable to noncontrolling interests		3			1			6			2			14			5
Net earnings (loss) attributable to Devon	$	213		$	(1,816	)	$	838		$	(92	)	$	1,307		$	(2,578	)
Basic net earnings (loss) per share:
Basic earnings (loss) from continuing operations per share	$	0.33		$	(4.48	)	$	1.24		$	(0.29	)	$	1.95		$	(6.58	)
Basic loss from discontinued operations per share		—			(0.34	)
Basic earnings (loss) from discontinued operations per share								—			0.04			—			(0.27	)
Basic net earnings (loss) per share	$	0.33		$	(4.82	)	$	1.24		$	(0.25	)	$	1.95		$	(6.85	)
Diluted net earnings (loss) per share:
Diluted earnings (loss) from continuing operations per share	$	0.32		$	(4.48	)	$	1.24		$	(0.29	)	$	1.95		$	(6.58	)
Diluted loss from discontinued operations per share		—			(0.34	)
Diluted earnings (loss) from discontinued operations per share								—			0.04			—			(0.27	)
Diluted net earnings (loss) per share	$	0.32		$	(4.82	)	$	1.24		$	(0.25	)	$	1.95		$	(6.85	)
Comprehensive earnings (loss):
Net earnings (loss)	$	216		$	(1,815	)	$	844		$	(90	)	$	1,321		$	(2,573	)
Other comprehensive earnings (loss), net of tax:
Other comprehensive earnings, net of tax:
Pension and postretirement plans		23			1			1			1			27			3
Other comprehensive earnings, net of tax		23			1			1			1			27			3
Comprehensive earnings (loss):	$	239		$	(1,814	)		845			(89	)		1,348			(2,570	)
Comprehensive earnings attributable to noncontrolling interests		3			1			6			2			14			5
Comprehensive earnings (loss) attributable to Devon	$	236		$	(1,815	)	$	839		$	(91	)	$	1,334		$	(2,575	)

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020
	(Unaudited)						(Unaudited)
Cash flows from operating activities:
Net earnings (loss)	$	216		$	(1,815	)	$	844		$	(90	)	$	1,321		$	(2,573	)
Adjustments to reconcile net earnings (loss) to net cash from operating activities:
Net loss from discontinued operations, net of income taxes		—			125
Net (earnings) loss from discontinued operations, net of income taxes								—			(13	)		—			103
Depreciation, depletion and amortization		467			401			578			299			1,581			999
Asset impairments		—			2,666			—			—			—			2,666
Leasehold impairments		1			110			1			36			3			149
(Amortization) accretion of liabilities		(54	)		8			(7	)		8			(21	)		24
Total (gains) losses on commodity derivatives		528			(720	)		335			87			1,566			(272	)
Cash settlements on commodity derivatives		(232	)		101			(370	)		10			(969	)		343
Gains on asset dispositions		(32	)		—			—			—			(119	)		—
Deferred income tax benefit		(243	)		(311	)
Deferred income tax expense (benefit)								119			—			(100	)		(311	)
Share-based compensation		41			20			19			31			80			70
Early retirement of debt		27			—			—			—			(30	)		—
Other								11			1			13			5
Changes in assets and liabilities, net		(127	)		(56	)		68			58			(42	)		(97	)
Net cash from operating activities - continuing operations		592			529			1,598			427			3,283			1,106
Cash flows from investing activities:
Capital expenditures		(499	)		(425	)		(474	)		(204	)		(1,477	)		(936	)
Acquisitions of property and equipment		—			(4	)		(10	)		—			(15	)		(5	)
Divestitures of property and equipment		15			25			1			1			65			29
WPX acquired cash		344			—			—			—			344			—
Distributions from equity method investments		10			—			9			—			27			—
Net cash from investing activities - continuing operations		(130	)		(404	)		(474	)		(203	)		(1,056	)		(912	)
Cash flows from financing activities:
Repayments of long-term debt		(533	)		—			—			—			(1,243	)		—
Early retirement of debt		(27	)		—			—			—			(59	)		—
Repurchases of common stock		—			(38	)		—			—			—			(38	)
Dividends paid on common stock		(203	)		(34	)		(329	)		(43	)		(761	)		(119	)
Contributions from noncontrolling interests		—			5			1			1			4			12
Distributions to noncontrolling interests		(4	)		(3	)		(6	)		(4	)		(15	)		(10	)
Acquisition of noncontrolling interests		(24	)		—			—			—			(24	)		—
Shares exchanged for tax withholdings		(33	)		(17	)
Shares exchanged for tax withholdings and other								(3	)		—			(45	)		(17	)
Net cash from financing activities - continuing operations		(824	)		(87	)		(337	)		(46	)		(2,143	)		(172	)
Effect of exchange rate changes on cash - continuing operations		3			—			(5	)		—			—			—
Net change in cash, cash equivalents and restricted cash of continuing operations		(359	)		38			782			178			84			22
Cash flows from discontinued operations:
Operating activities		0			(131	)		0			45			0			(129	)
Investing activities		0			(1	)		0			1			0			171
Financing activities		0			0			0			0			0			0
Effect of exchange rate changes on cash		0			(23	)		0			4			0			(11	)
Net change in cash, cash equivalents and restricted cash of discontinued operations		0			(155	)		0			50			0			31
Net change in cash, cash equivalents and restricted cash		(359	)		(117	)		782			228			84			53
Cash, cash equivalents and restricted cash at beginning of period		2,237			1,844			1,539			1,669			2,237			1,844
Cash, cash equivalents and restricted cash at end of period	$	1,878		$	1,727		$	2,321		$	1,897		$	2,321		$	1,897

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	1,683		$	1,527		$	2,144		$	1,707		$	2,144		$	1,707
Restricted cash		195			200			177			190			177			190
Total cash, cash equivalents and restricted cash	$	1,878		$	1,727		$	2,321		$	1,897		$	2,321		$	1,897

	March 31, 2021			December 31, 2020			September 30, 2021			December 31, 2020
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and restricted cash	$	1,878		$	2,237		$	2,321		$	2,237
Accounts receivable		1,089			601			1,517			601
Income taxes receivable		166			174			80			174
Other current assets		334			248			309			248
Total current assets		3,467			3,260			4,227			3,260
Oil and gas property and equipment, based on successful efforts accounting, net		13,826			4,436			13,613			4,436
Other property and equipment, net ($106 million and $102 million related to CDM in 2021 and 2020, respectively)		1,448			957			1,465			957
Total property and equipment, net		15,274			5,393			15,078			5,393
Goodwill		753			753			753			753
Right-of-use assets		255			223			244			223
Investments		402			12			388			12
Other long-term assets		306			271			367			271
Total assets	$	20,457		$	9,912		$	21,057		$	9,912
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	564		$	242		$	537		$	242
Revenues and royalties payable		909			662			1,443			662
Short-term debt		226			—
Other current liabilities		1,246			536			1,525			536
Total current liabilities		2,945			1,440			3,505			1,440
Long-term debt		7,042			4,298			6,492			4,298
Lease liabilities		260			246			256			246
Asset retirement obligations		455			358			462			358
Other long-term liabilities		1,269			551			1,281			551
Stockholders' equity:
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 675 million and 382 million shares in 2021 and 2020, respectively		67			38
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 677 million and 382 million shares in 2021 and 2020, respectively								68			38
Additional paid-in capital		8,172			2,766			8,206			2,766
Retained earnings		218			208			750			208
Accumulated other comprehensive loss		(104	)		(127	)		(100	)		(127	)
Total stockholders’ equity attributable to Devon		8,353			2,885			8,924			2,885
Noncontrolling interests		133			134			137			134
Total equity		8,486			3,019			9,061			3,019
Total liabilities and equity	$	20,457		$	9,912		$	21,057		$	9,912

									Retained			Other																							Other
						Additional			Earnings			Comprehensive																	Additional						Comprehensive
	Common Stock					Paid-In			(Accumulated			Earnings			Treasury			Noncontrolling			Total			Common Stock					Paid-In			Retained			Earnings			Treasury			Noncontrolling			Total
	Shares			Amount		Capital			Deficit)			(Loss)			Stock			Interests			Equity			Shares			Amount		Capital			Earnings			(Loss)			Stock			Interests			Equity
	(Unaudited)																							(Unaudited)
Three Months Ended March 31, 2021
Three Months Ended September 30, 2021
Balance as of June 30, 2021																									677		$	68	$	8,189		$	243		$	(101	)	$	—		$	136		$	8,535
Net earnings																									—			—		—			838			—			—			6			844
Other comprehensive earnings, net of tax																									—			—		—			—			1			—			—			1
Restricted stock grants, net of cancellations																									—			—		(1	)		—			—			—			—			(1	)
Common stock repurchased																									—			—		—			—			—			(1	)		—			(1	)
Common stock retired																									—			—		(1	)		—			—			1			—			—
Common stock dividends																									—			—		—			(331	)		—			—			—			(331	)
Share-based compensation																									—			—		19			—			—			—			—			19
Contributions from noncontrolling interests																									—			—		—			—			—			—			1			1
Distributions to noncontrolling interests																									—			—		—			—			—			—			(6	)		(6	)
Balance as of September 30, 2021																									677		$	68	$	8,206		$	750		$	(100	)	$	—		$	137		$	9,061
Three Months Ended September 30, 2020
Balance as of June 30, 2020																									383		$	38	$	2,720		$	586		$	(117	)	$	—		$	126		$	3,353
Net earnings (loss)																									—			—		—			(92	)		—			—			2			(90	)
Other comprehensive earnings, net of tax																									—			—		—			—			1			—			—			1
Common stock repurchased																									—			—		—			—			—			(1	)		—			(1	)
Common stock retired																									—			—		(1	)		—			—			1			—			—
Common stock dividends																									—			—		—			(143	)		—			—			—			(143	)
Share-based compensation																									—			—		31			—			—			—			—			31
Contributions from noncontrolling interests																									—			—		—			—			—			—			1			1
Distributions to noncontrolling interests																									—			—		—			—			—			—			(4	)		(4	)
Balance as of September 30, 2020																									383		$	38	$	2,750		$	351		$	(116	)	$	—		$	125		$	3,148
Nine Months Ended September 30, 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			—			—		—			1,307			—			—			14			1,321
Other comprehensive earnings, net of tax		—			—		—			—			23			—			—			23			—			—		—			—			27			—			—			27
Restricted stock grants, net of cancellations		4			—		—			—			—			—			—			—			6			1		(2	)		—			—			—			—			(1	)
Common stock repurchased		—			—		—			—			—			(38	)		—			(38	)		—			—		—			—			—			(41	)		—			(41	)
Common stock retired		(2	)		—		(38	)		—			—			38			—			—			(2	)		—		(41	)		—			—			41			—			—
Common stock dividends		—			—		—			(203	)		—			—			—			(203	)		—			—		—			(765	)		—			—			—			(765	)
Common stock issued		290			29		5,403			—			—			—			—			5,432			290			29		5,403			—			—			—			—			5,432
Share-based compensation		1			—		41			—			—			—			—			41			1			—		80			—			—			—			—			80
Contributions from noncontrolling interests		—			—		—			—			—			—			—			—			—			—		—			—			—			—			3			3
Distributions to noncontrolling interests		—			—		—			—			—			—			(4	)		(4	)		—			—		—			—			—			—			(14	)		(14	)
Balance as of March 31, 2021		675		$	67	$	8,172		$	218		$	(104	)	$	—		$	133		$	8,486
Three Months Ended March 31, 2020
Balance as of September 30, 2021																									677		$	68	$	8,206		$	750		$	(100	)	$	—		$	137		$	9,061
Nine Months Ended September 30, 2020
Balance as of December 31, 2019		382		$	38	$	2,735		$	3,148		$	(119	)	$	—		$	118		$	5,920			382		$	38	$	2,735		$	3,148		$	(119	)	$	—		$	118		$	5,920
Net earnings (loss)		—			—		—			(1,816	)		—			—			1			(1,815	)		—			—		—			(2,578	)		—			—			5			(2,573	)
Other comprehensive earnings, net of tax		—			—		—			—			1			—			—			1			—			—		—			—			3			—			—			3
Restricted stock grants, net of cancellations		3			—		—			—			—			—			—			—			3			—		—			—			—			—			—			—
Common stock repurchased		—			—		—			—			—			(54	)		—			(54	)		—			—		—			—			—			(55	)		—			(55	)
Common stock retired		(3	)		—		(54	)		—			—			54			—			—			(3	)		—		(55	)		—			—			55			—			—
Common stock dividends		—			—		—			(34	)		—			—			—			(34	)		—			—		—			(219	)		—			—			—			(219	)
Share-based compensation		1			—		20			—			—			—			—			20			1			—		70			—			—			—			—			70
Contributions from noncontrolling interests		—			—		—			—			—			—			5			5			—			—		—			—			—			—			12			12
Distributions to noncontrolling interests		—			—		—			—			—			—			(3	)		(3	)		—			—		—			—			—			—			(10	)		(10	)
Balance as of March 31, 2020		383		$	38	$	2,701		$	1,298		$	(118	)	$	—		$	121		$	4,040
Balance as of September 30, 2020																									383		$	38	$	2,750		$	351		$	(116	)	$	—		$	125		$	3,148

The accompanying unaudited interim financial statements and notes of Devon have been prepared pursuant to the rules and regulations of the SEC. Pursuant to such rules and regulations, certain disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted. The accompanying unaudited interim financial statements and notes should be read in conjunction with the financial statements and notes included in Devon’s 2020 Annual Report on Form 10-K. The accompanying unaudited interim financial statements in this report reflect all adjustments that are, in the opinion of management, necessary for a fair statement of Devon’s results of operations and cash flows for the three-month and nine-month periods ended ~~March 31,~~September 30, 2021 and 2020 and Devon’s financial position as of ~~March 31,~~September 30, 2021.

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

As further discussed in Note 1817, Devon closed on the sale of its Barnett Shale assets in October 2020. Prior to December 31, 2020, activity relating to Devon’s Barnett Shale assets is classified as discontinued operations within Devon’s consolidated statements of comprehensive earnings and consolidated statements of cash flows.

As of ~~March 31,~~September 30, 2021, Devon classified approximately ~~$185~~$165 million of cash as restricted cash on the consolidated balance sheets for obligations ~~associated with the abandonment of certain gas processing contracts~~retained related to ~~divestitures of other~~the Barnett Shale assets ~~that occurred in 2018~~ and ~~obligations retained related to~~ the Canadian business. Cash payments for these charges related to the Barnett assets and Canada business total approximately $10 million per quarter.

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

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

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

	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		2021		2020
Oil	$	1,357	$	662	$	1,900	$	504	$	4,917	$	1,462
Gas		207		70		309		79		699		221
NGL		224		75		426		95		930		226
Oil, gas and NGL sales		1,788		807		2,635		678		6,546		1,909

Oil		209		329		649		233		1,758		702
Gas		118		94		196		100		477		275
NGL		175		137		321		143		718		390
Marketing and midstream revenues		502		560		1,166		476		2,953		1,367
Total revenues from contracts with customers	$	2,290	$	1,367	$	3,801	$	1,154	$	9,499	$	3,276

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

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

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

			Preliminary Purchase
			Price Allocation
	Preliminary Purchase Price Allocation		as of September 30, 2021
Consideration:
WPX Common Stock outstanding		561.2		561.2
Exchange Ratio		0.5165		0.5165
Devon common stock issued		289.9		289.9
Devon closing price on January 7, 2021	$	18.57	$	18.57
Total common equity consideration		5,383		5,383
Share-based replacement awards		49		49
Total consideration	$	5,432	$	5,432
Assets acquired:
Cash, cash equivalents and restricted cash	$	344	$	344
Accounts receivable		425		425
Other current assets		49		49
Right-of-use assets		38		38
Proved oil and gas property and equipment		7,017		7,017
Unproved and properties under development		2,367		2,362
Other property and equipment		485		485
Investments		400		400
Other long-term assets		43		43
Total assets acquired	$	11,168	$	11,163
Liabilities assumed:
Accounts payable	$	346	$	346
Revenue and royalties payable		223		223
Other current liabilities		454		454
Debt		3,562		3,562
Lease liabilities		38		38
Asset retirement obligations		94		94
Deferred income taxes		254		249
Other long-term liabilities		765		765
Total liabilities assumed		5,736		5,731
Net assets acquired	$	5,432	$	5,432

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

	Three Months Ended March 31,		Three Months Ended September 30,		Nine Months Ended September 30,
	2021		2021		2021
Total revenues	$	772	$	1,564	$	3,977
Net earnings	$	166	$	414	$	969

Due to the Merger closing on January 7, 2021, all activity in the first ~~quarter~~nine months of 2021 except for the first six days of January is included in Devon’s consolidated statements of comprehensive ~~earnings.~~earnings for the nine months ended September 30, 2021. The following unaudited pro forma financial information for the three and nine months ended ~~March 31,~~September 30, 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.

	Three Months Ended March 31,			Three Months Ended September 30,			Nine Months Ended September 30,
Continuing operations:	2020			2020			2020
Total revenues	$	3,485		$	1,540		$	5,452
Net loss	$	(1,864	)	$	(281	)	$	(3,247	)
Basic net loss per share	$	(2.77	)	$	(0.42	)	$	(4.87	)

~~On March 3,~~In the first quarter of 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 million gain related to the sale. The transaction includes contingent earnout payments of up to $8 million. 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.

~~On October 1,~~In the fourth quarter of 2020, Devon completed 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, 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. ~~Devon recognized a $748 million asset impairment related to these~~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~~September 30, 2021 consolidated balance sheet was $46 million and $3$85 million, ~~during~~respectively. During the first ~~quarter~~nine months of 2021, Devon recorded a $65 million increase to the fair value within asset dispositions on the consolidated statements of comprehensive earnings. The value was derived utilizing a Monte Carlo valuation model and ~~third quarter of 2020, respectively.~~qualifies as a level 3 fair value measurement. Additional information can be found in Note 1817.

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,~~September 30, 2021, Devon did not have any open interest rate swap contracts.

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

By using derivative financial instruments, Devon is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with a number of counterparties whom Devon believes are acceptable credit risks. It is Devon’s policy to enter into derivative contracts only with investment-grade rated counterparties deemed by management to be competent and competitive market makers. Additionally, Devon’s derivative contracts generally contain provisions that provide for collateral payments if Devon’s or its counterparty’s credit rating falls below certain credit rating levels. As of ~~March 31,~~September 30, 2021, Devon neither held cash collateral of its counterparties 0r posted cash collateral to its counterparties.

As of ~~March 31,~~September 30, 2021, Devon had the following open oil derivative positions. The first table presents Devon’s oil derivatives that settle against the average of the prompt month NYMEX WTI futures price. The second table presents Devon’s oil derivatives that settle against the respective indices noted within the table.

	Price Swaps				Price Swaptions				Price Collars						Call Options Sold				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 ($/Bbl)		Volume (Bbls/d)		Weighted Average Price ($/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
Q4 2021																				66,460	$	41.24		—	$	—		48,250	$	38.82	$	48.82		5,000	$	39.50
Q1-Q4 2022		25,619	$	43.82		10,323	$	46.46		15,733	$	44.92	$	54.92		—	$	—		26,112	$	43.75		10,000	$	46.67		20,233	$	46.41	$	56.41		—	$	—

As of ~~March 31,~~September 30, 2021, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index and the end of month NYMEX index. The second table presents Devon’s natural gas derivatives that settle against the respective indices noted within the table.

	Price Swaps ⁽¹⁾				Price Swaptions ⁽²⁾				Price Collars ⁽²⁾						Call Options Sold ⁽²⁾				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 ($/MMBtu)		Volume (MMBtu/d)		Weighted Average Price ($/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
Q4 2021																				254,000	$	2.63		—	$	—		133,000	$	2.55	$	3.05		50,000	$	2.68
Q1-Q4 2022		3,452	$	2.85		100,000	$	2.70		69,110	$	2.54	$	3.04		—	$	—		3,452	$	2.85		100,000	$	2.70		145,507	$	2.69	$	3.40		—	$	—
Q1-Q4 2023																				—	$	—		—	$	—		10,603	$	3.11	$	4.56		—	$	—

	Natural Gas Basis Swaps						Natural Gas Basis Swaps
Period	Index	Volume (MMBtu/d)		Weighted Average Differential to Henry Hub ($/MMBtu)			Index	Volume (MMBtu/d)		Weighted Average Differential to Henry Hub ($/MMBtu)
Q2-Q4 2021	El Paso Natural Gas		35,000	$	(0.92	)
Q2-Q4 2021	WAHA		80,000	$	(0.65	)
Q4 2021							El Paso Natural Gas		35,000	$	(0.92	)
Q4 2021							WAHA		80,000	$	(0.65	)
Q1-Q4 2022	WAHA		70,000	$	(0.57	)	WAHA		70,000	$	(0.57	)
Q1-Q4 2023	WAHA		70,000	$	(0.51	)	WAHA		70,000	$	(0.51	)
Q1-Q4 2024	WAHA		40,000	$	(0.51	)	WAHA		40,000	$	(0.51	)

As of ~~March 31,~~September 30, 2021, Devon had the following open NGL derivative positions. Devon’s NGL positions settle against the average of the prompt month OPIS Mont Belvieu, Texas index.

~~The following table presents the 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 September 30, 2021 and December 31, 2020.

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

	Three Months Ended March 31,				Nine Months Ended September 30,
	2021		2020		2021		2020
G&A	$	20	$	20	$	58	$	58
Exploration expenses						1		1
Restructuring and transaction costs		21		—		21		11
Total	$	41	$	20	$	80	$	70
Related income tax benefit					$	8	$	—

Under its approved long-term incentive plan, Devon grants share-based awards to certain employees. The following table presents a summary of Devon’s unvested restricted stock awards and units, performance-based restricted stock awards and performance share units granted under the plan.

						Performance-Based					Performance														Performance-Based					Performance
	Restricted Stock Awards & Units					Restricted Stock Awards					Share Units							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		Awards/Units					Weighted Average Grant-Date Fair Value		Awards			Weighted Average Grant-Date Fair Value		Units					Weighted Average Grant-Date Fair Value
	(Thousands, except fair value data)																	(Thousands, except fair value data)
Unvested at 12/31/20		5,316		$	25.82		44		$	44.70		1,994				$	31.89		5,316				$	25.82		44		$	44.70		1,994				$	31.89
Granted ⁽¹⁾		5,542		$	18.71		—		$	—		861				$	18.08		7,711		⁽¹	⁾	$	19.69		—		$	—		861				$	18.08
Vested		(4,329	)	$	22.63		(39	)	$	45.41		(754	)			$	37.40		(5,006	)			$	22.35		(44	)	$	44.70		(754	)			$	37.40
Forfeited		(20	)	$	24.79		—		$	—		(25	)			$	36.04		(126	)			$	23.21		—		$	—		(25	)			$	36.04
Unvested at 3/31/21		6,509		$	21.89		5		$	38.54		2,076		⁽²	⁾	$	24.12
Unvested at 9/30/21																			7,895				$	22.08		—		$	—		2,076		⁽²	⁾	$	24.12

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

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,~~September 30, 2021.

			Performance-Based
	Restricted Stock		Restricted Stock		Performance		Restricted Stock		Performance
	Awards/Units		Awards		Share Units		Awards/Units		Share Units
Unrecognized compensation cost	$	88	$	—	$	21	$	97	$	15
Weighted average period for recognition (years)		2.2		0.2		2.3		2.5		1.9

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,				Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		2021		2020
Proved oil and gas assets	$	—	$	2,664	$	—	$	—	$	—	$	2,664
Other assets		—		2		—		—		—		2
Total asset impairments	$	—	$	2,666	$	—	$	—	$	—	$	2,666

Unproved impairments	$	1	$	110	$	1	$	36	$	3	$	149

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~~149 million of unproved impairments during the first ~~three~~nine months of 2020, primarily in the Rockies field.

In conjunction with the Merger closing, Devon recognized ~~$143~~$182 million of restructuring expenses during the first ~~quarter~~nine months of 2021 related to employee severance and termination benefits, settlements and curtailments from defined retirement benefits and contract terminations. Of these expenses, ~~$37~~$65 million ~~and $21 million resulted from~~related to non-cash charges which primarily consisted of settlements and curtailments of defined retirement benefits of $40 million and the accelerated vesting of share-based grants ~~respectively, which are non-cash charges.~~of $21 million. Additionally, in conjunction primarily with the Merger closing, Devon recognized ~~$46~~$48 million of transaction costs primarily comprised of bank, legal and accounting fees.

In the third quarter of 2020, Devon recognized $32 million of restructuring expenses. Of these expenses, $11 million resulted from the accelerated vesting of share-based grants, which are non-cash charges.

	Other			Other						Other			Other
	Current			Long-term						Current			Long-term
	Liabilities			Liabilities			Total			Liabilities			Liabilities			Total
Balance as of December 31, 2020	$	35		$	137		$	172		$	35		$	137		$	172
Changes related to 2021 workforce reductions		61			—			61
Changes related to 2021 merger integration											27			—			27
Changes related to prior years' restructurings		(2	)		(7	)		(9	)		(8	)		(18	)		(26	)
Balance as of March 31, 2021	$	94		$	130		$	224
Balance as of September 30, 2021										$	54		$	119		$	173

Balance as of December 31, 2019	$	20		$	1		$	21		$	20		$	1		$	21
Changes related to prior years' restructurings		(9	)		—			(9	)		(3	)		—			(3	)
Balance as of March 31, 2020	$	11		$	1		$	12
Balance as of September 30, 2020										$	17		$	1		$	18

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.

The deferred income tax benefit recognized in the first ~~quarter~~nine months of 2021 primarily relates to the ~~Merger.~~Merger and a reduced valuation allowance due to increased earnings. As shown in Note 2, Devon recognized ~~$254~~$249 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 recognized on its U.S. Federal deferred tax assets. Additionally, improved commodity prices and post-merger operating performance are causing reductions to Devon’s net operating losses, which also cause corresponding decreases to the associated deferred tax assets and valuation allowance.

As of ~~March 31,~~September 30, 2021, Devon ~~continues~~continued to maintain a valuation allowance against ~~materially all~~certain U.S. deferred tax assets. Devon continues to assess its valuation allowance position every quarter. ~~Absent~~Subject to any additional objective negative evidence ~~and with~~or the addition of subjective evidence such as forecasted ~~taxable~~ income, Devon may continue to adjust the valuation allowance on its deferred tax assets in future periods.

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

~~The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) became law on March 27, 2020. The CARES Act allows~~2020, Devon recorded a deferred tax asset representing the deductible outside basis difference in its investment in a consolidated subsidiary. In the second quarter of 2021, Devon realized this deferred tax asset, increasing its U.S. federal 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 higher in the carryback periods, Devon recognized an income tax benefit in the first quarter of 2020.loss carryforwards by $1.8 billion.

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

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020
Net earnings (loss) from continuing operations:
Net earnings (loss) from continuing operations	$	213		$	(1,691	)	$	838		$	(105	)	$	1,307		$	(2,475	)
Attributable to participating securities		(2	)		(1	)		(6	)		(2	)		(11	)		(3	)
Basic and diluted earnings (loss) from continuing operations	$	211		$	(1,692	)	$	832		$	(107	)	$	1,296		$	(2,478	)
Common shares:
Common shares outstanding - total		654			383			677			383			670			383
Attributable to participating securities		(5	)		(6	)		(6	)		(6	)		(6	)		(6	)
Common shares outstanding - basic		649			377			671			377			664			377
Dilutive effect of potential common shares issuable		2			—			2			—			2			—
Common shares outstanding - diluted		651			377			673			377			666			377
Net earnings (loss) per share from continuing operations:
Basic	$	0.33		$	(4.48	)	$	1.24		$	(0.29	)	$	1.95		$	(6.58	)
Diluted	$	0.32		$	(4.48	)	$	1.24		$	(0.29	)	$	1.95		$	(6.58	)
Antidilutive options		—			—

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020
Pension and postretirement benefit plans:
Beginning accumulated pension and postretirement benefits	$	(127	)	$	(119	)	$	(101	)	$	(117	)	$	(127	)	$	(119	)
Recognition of net actuarial loss and prior service cost in earnings ⁽¹⁾		1			2			1			1			2			4
Settlement of pension benefits ⁽²⁾		15			—			—			—			18			—
Income tax expense		—			(1	)		—			—			—			(1	)
Other ⁽³⁾		7			—			—			—			7			—
Accumulated other comprehensive loss, net of tax	$	(104	)	$	(118	)	$	(100	)	$	(116	)	$	(100	)	$	(116	)

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020
Changes in assets and liabilities, net:
Accounts receivable	$	(63	)	$	238		$	(332	)	$	21		$	(495	)	$	339
Income tax receivable		15			(113	)		(40	)		—			94			(112	)
Other current assets		(25	)		(38	)		21			18			(36	)		10
Other long-term assets		(10	)		(24	)		14			(9	)		(9	)		(33	)
Accounts payable		71			42
Revenues and royalties payable		(55	)		(113	)
Accounts payable and revenues and royalties payable								469			100			557			(160	)
Other current liabilities		(33	)		(81	)		(49	)		15			(30	)		(82	)
Other long-term liabilities		(27	)		33			(15	)		(87	)		(123	)		(59	)
Total	$	(127	)	$	(56	)	$	68		$	58		$	(42	)	$	(97	)
Supplementary cash flow data - total operations:
Interest paid	$	114		$	64		$	100		$	64		$	319		$	194
Income taxes paid (refunded)	$	(6	)	$	151		$	(4	)	$	(2	)	$	(116	)	$	170

As of ~~March 31,~~September 30, 2021, Devon had approximately ~~$230~~$200 million of accrued capital expenditures included in total property and equipment, net and accounts payable on the consolidated balance sheets. As of December 31, 2020 (pre-merger), Devon had approximately $100 million of accrued capital expenditures in total property and equipment, net and accounts payable on the consolidated balance sheets. As of January 7, 2021 (date of Merger closing), Devon assumed approximately $150 million of accrued capital expenditures included in accounts payable.

	March 31, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Oil, gas and NGL sales	$	742		$	335		$	986		$	335
Joint interest billings		127			57			150			57
Marketing and midstream revenues		181			195			371			195
Other		54			25			22			25
Gross accounts receivable		1,104			612			1,529			612
Allowance for doubtful accounts		(15	)		(11	)		(12	)		(11	)
Net accounts receivable	$	1,089		$	601		$	1,517		$	601

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

	March 31, 2021			December 31, 2020			September 30, 2021			December 31, 2020
Property and equipment:
Proved	$	35,119		$	27,589		$	36,489		$	27,589
Unproved and properties under development		2,692			392			2,169			392
Total oil and gas		37,811			27,981			38,658			27,981
Less accumulated DD&A		(23,985	)		(23,545	)		(25,045	)		(23,545	)
Oil and gas property and equipment, net		13,826			4,436			13,613			4,436
Other property and equipment		2,060			1,737			2,113			1,737
Less accumulated DD&A		(612	)		(780	)		(648	)		(780	)
Other property and equipment, net ⁽¹⁾		1,448			957			1,465			957
Property and equipment, net	$	15,274		$	5,393		$	15,078		$	5,393

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

	March 31, 2021			December 31, 2020			September 30, 2021			December 31, 2020
8.25% due August 1, 2023 ⁽¹⁾	$	242		$	—
5.25% due September 15, 2024 ⁽¹⁾		472			—
8.25% due August 1, 2023 ⁽¹⁾							$	242		$	—
5.25% due September 15, 2024 ⁽¹⁾								472			—
5.85% due December 15, 2025		485			485			485			485
5.75% due June 1, 2026 ⁽¹⁾		500			—
7.50% due September 15, 2027		73			73			73			73
5.25% due October 15, 2027 ⁽¹⁾		600			—
5.875% due June 15, 2028 ⁽¹⁾		325			—
4.50% due January 15, 2030 ⁽¹⁾		585			—
5.25% due October 15, 2027 ⁽¹⁾								390			—
5.875% due June 15, 2028 ⁽¹⁾								325			—
4.50% due January 15, 2030 ⁽¹⁾								585			—
7.875% due September 30, 2031		675			675			675			675
7.95% due April 15, 2032		366			366			366			366
5.60% due July 15, 2041		1,250			1,250			1,250			1,250
4.75% due May 15, 2042		750			750			750			750
5.00% due June 15, 2045		750			750			750			750
Net premium (discount) on debentures and notes		226			(20	)		160			(20	)
Debt issuance costs		(31	)		(31	)		(31	)		(31	)
Total debt	$	7,268		$	4,298
Less amount classified as short-term debt		226			—
Total long-term debt	$	7,042		$	4,298		$	6,492		$	4,298

Debt maturities as of September 30, 2021, excluding debt issuance costs, premiums and discounts, are as follows:

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

In the first nine months of 2021, Devon redeemed $43 million of the 6.00% senior notes due 2022, $175 million of the 5.875% senior notes due 2028, $315 million of the 4.50% senior notes due 2030, $210 million of the 5.25% senior notes due 2027 and $500 million of the 5.75% senior notes due 2026. In the first nine months of 2021, Devon recognized $30 million of gains on early retirement of debt, consisting of $89 million of non-cash premium accelerations, partially offset by $59 million of cash retirement costs. The gain on early retirement is included in financing costs, net in the consolidated statements of comprehensive earnings.

Devon has a $3.0 billion Senior Credit Facility. As of ~~March 31,~~September 30, 2021, Devon had 0 outstanding borrowings under the Senior Credit Facility and had issued $2 million in outstanding letters of credit under this facility. The Senior Credit Facility contains only one material financial covenant. This covenant requires Devon’s ratio of total funded debt to total capitalization, as defined in the credit agreement, to be no greater than 65%. Under the terms of the credit agreement, total capitalization is adjusted to add back ~~non-~~

~~cash~~non-cash financial write-downs such as impairments. As of ~~March 31,~~September 30, 2021, Devon was in compliance with this covenant with a debt-to-capitalization ratio of ~~27.4%~~25.1%.

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.

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020
Interest based on debt outstanding	$	105		$	65		$	93		$	65		$	296		$	195
Gain on early retirement of debt		(20	)		—			—			—			(30	)		—
Interest income		(1	)		(5	)		(1	)		(5	)		(2	)		(12	)
Other		(7	)		5			(6	)		6			(21	)		17
Total net financing costs	$	77		$	65		$	86		$	66		$	243		$	200

The following table presents Devon’s right-of-use assets and lease liabilities as of ~~March 31,~~September 30, 2021 and December 31, 2020.

	March 31, 2021						December 31, 2020						September 30, 2021						December 31, 2020
	Finance		Operating		Total		Finance		Operating		Total		Finance		Operating		Total		Finance		Operating		Total
Right-of-use assets	$	217	$	38	$	255	$	220	$	3	$	223	$	214	$	30	$	244	$	220	$	3	$	223
Lease liabilities:
Current lease liabilities ⁽¹⁾	$	8	$	23	$	31	$	8	$	1	$	9	$	8	$	20	$	28	$	8	$	1	$	9
Long-term lease liabilities		244		16		260		244		2		246		246		10		256		244		2		246
Total lease liabilities	$	252	$	39	$	291	$	252	$	3	$	255	$	254	$	30	$	284	$	252	$	3	$	255

(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.~~

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

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

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

On January 7, 2021, Devon and WPX completed an all-stock merger of equals. On the closing date of the Merger, each share of WPX common stock was automatically converted into the right to receive 0.5165 of a share of Devon common stock. Consequently, Devon issued approximately 290 million shares of Devon common stock to holders of WPX common stock to effect the Merger on January 7, 2021.

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

In November 2021, Devon authorized a share repurchase program to buy up to $1.0 billion of common stock. This program expires December 31, 2022.

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

In ~~May~~November 2021, Devon announced a cash dividend in the amount of ~~$0.34~~$0.84 per share payable in the ~~second~~fourth quarter of 2021. The dividend consists of a fixed quarterly dividend in the amount of approximately $74 million (or $0.11 per share) and a variable quarterly dividend in the amount of approximately ~~$155~~$494 million (or ~~$0.23~~$0.73 per share).

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

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.

	Three Months Ended March 31, 2020			Three Months Ended September 30, 2020			Nine Months Ended September 30, 2020
Oil, gas and NGL sales	$	92		$	94		$	263
Total revenues		92			94			263
Production expenses		74			66			214
Asset impairments ⁽¹⁾		179			3			182
Asset dispositions					—			(2	)
General and administrative expenses		1			2			3
Financing costs, net		(2	)		(1	)		(3	)
Other, net		(3	)		26			19
Total expenses		249			96			413
Loss from discontinued operations before income taxes		(157	)		(2	)		(150	)
Income tax benefit		(32	)		(15	)		(47	)
Net loss from discontinued operations, net of tax	$	(125	)
Net earnings (loss) from discontinued operations, net of tax				$	13		$	(103	)

Devon is party to various legal proceedings and other matters that may result in future payment obligations or other adverse consequences to its business. Matters that are probable of an unfavorable outcome to Devon and which any related potential payment obligation or other liability can be reasonably estimated are accrued. Such accruals are based on information known about the matters, Devon’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. While management does not believe any current matter is 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 amounts involved could differ materially from management’s estimates.

Numerous oil and natural gas producers and related parties, including Devon, have been named in various lawsuits alleging royalty underpayments. Devon is currently defending against a number of such lawsuits, either as a named defendant in the action or pursuant to indemnity obligations for the benefit of a third party. Plaintiffs in some of these lawsuits are seeking class certification. Among the allegations typically asserted in these suits are claims that Devon used below-market prices, made improper deductions, failed to “enhance” the value of gas through processing, used improper measurement techniques, entered into purchase and midstream arrangements with affiliates that resulted in underpayment of royalties or otherwise failed to prudently market oil, natural gas and NGLs produced and sold and pay royalties on the highest obtainable price. Devon is also involved in governmental agency proceedings and royalty audits and is subject to related contracts and regulatory controls in the ordinary course of business, some that may lead to additional royalty claims. Devon does not currently believe that it is subject to material exposure with respect to such royalty matters.

Devon’s business is subject to numerous federal, state, local and Native American tribal ~~and foreign~~ 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 to be baseless and is vigorously defending against these claims.

The State of Delaware and various municipalities and other governmental and private parties in California have filed legal proceedings against 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. 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,~~September 30, 2021 and December 31, 2020, as applicable. Therefore, such financial assets and liabilities are not presented in the following table. Additionally, information regarding the fair values of oil and gas assets is provided in Note 5.

							Fair Value Measurements Using:													Fair Value Measurements Using:
	Carrying			Total Fair			Level 1		Level 2			Level 3		Carrying			Total Fair			Level 1		Level 2			Level 3
	Amount			Value			Inputs		Inputs			Inputs		Amount			Value			Inputs		Inputs			Inputs
March 31, 2021 assets (liabilities):
September 30, 2021 assets (liabilities):
Cash equivalents	$	1,075		$	1,075		$	1,075	$	—		$	—	$	1,321		$	1,321		$	1,321	$	—		$	—
Commodity derivatives	$	6		$	6		$	—	$	6		$	—	$	2		$	2		$	—	$	2		$	—
Commodity derivatives	$	(789	)	$	(789	)	$	—	$	(789	)	$	—	$	(1,086	)	$	(1,086	)	$	—	$	(1,086	)	$	—
Debt	$	(7,268	)	$	(8,091	)	$	—	$	(8,091	)	$	—	$	(6,492	)	$	(7,629	)	$	—	$	(7,629	)	$	—
Contingent earnout payments	$	70		$	70		$	—	$	—		$	70	$	135		$	135		$	—	$	—		$	135
December 31, 2020 assets (liabilities):
Cash equivalents	$	1,436		$	1,436		$	1,436	$	—		$	—	$	1,436		$	1,436		$	1,436	$	—		$	—
Commodity derivatives	$	6		$	6		$	—	$	6		$	—	$	6		$	6		$	—	$	6		$	—
Commodity derivatives	$	(148	)	$	(148	)	$	—	$	(148	)	$	—	$	(148	)	$	(148	)	$	—	$	(148	)	$	—
Debt	$	(4,298	)	$	(5,365	)	$	—	$	(5,365	)	$	—	$	(4,298	)	$	(5,365	)	$	—	$	(5,365	)	$	—
Contingent earnout payments	$	66		$	66		$	—	$	—		$	66	$	66		$	66		$	—	$	—		$	66

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

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

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

Debt – Devon’s debt instruments do not consistently trade actively 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~~and nine-month periods ended ~~March 31,~~September 30, 2021 compared to previous periods and in our financial condition and liquidity since December 31, 2020. ~~For~~To help facilitate comparisons to the three-month period ended June 30, 2021, information regarding our second quarter 2021 financial results can be found in our Second Quarter 2021 Quarterly Report on Form 10-Q . Additionally, for information regarding our critical accounting policies and estimates, see our 2020 Annual Report on Form 10-K under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

A novel strain of coronavirus, SARS-CoV-2, causing a disease referred to as COVID-19, was reported to have surfaced in China in late 2019 and has subsequently spread to multiple countries worldwide, resulting in a global pandemic and health crisis. Devon began actively monitoring COVID-19 in January 2020 and formally established a COVID-19 cross-functional planning team at the beginning of March 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~~ ~~under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”~~

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

We operate under a disciplined returns-driven strategy focused on delivering strong operational results, financial strength and value to our shareholders and continuing our commitment to ~~environmental, social and governance~~ESG excellence, which provides us with a strong foundation to grow returns, margin and profitability. We continue to execute on our strategy and navigate through ~~the challenged~~various economic ~~environment~~environments by protecting our financial strength, ~~tailoring our~~maintaining a commitment to capital ~~investment to market conditions,~~discipline, improving our cash cost structure and preserving operational continuity.

Commodity prices have strengthened throughout 2021 which has significantly improved our earnings and cash flow generation. The increase in commodity prices has been 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 current production levels.

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~~present amounts pertaining to Devon’s continuing operations. “Core earnings” and “EBITDAX” are financial measures not prepared in accordance with GAAP. For a description of these measures, including reconciliations to the comparable GAAP measures, see “Non-GAAP Measures” in this Item 2.

Our earnings increased from the second quarter of 2021 to the third quarter of 2021 primarily due to an increase in overall commodity prices as well as higher sold volumes. Led by a 42% and 7% increase in Henry Hub and WTI from the second quarter of 2021 to the third quarter of 2021, respectively, our unhedged combined realized price rose 13%. Volumes increased due to new well activity in the Delaware Basin and Eagle Ford.

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 second quarter of 2021, the first quarter of 2021, the fourth quarter of 2020 ~~the third quarter of 2020~~ and the ~~second~~third quarter of 2020 each included a hedge valuation loss, net of tax of $0.3 billion, $0.2 billion, $0.1 billion and $0.1 billion, ~~and $0.5 billion,~~ respectively. ~~Net earnings in the first quarter of 2020 included $2.3 billion of asset impairments on our proved and unproved properties and a $0.5 billion hedge valuation gain, both net of taxes.~~ Excluding these amounts, our core earnings have been more stable over recent quarters but continue to be heavily influenced by commodity prices.

Despite our portfolio enhancements, aggressive cost reductions and operational advancements, our financial results 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 and EBITDAX increased during the first, ~~quarter~~second and third quarters of 2021 primarily due to higher commodity prices and ~~the positive effects of the Merger.~~an increase in sold volumes driven by our WPX merger and improved post-merger operating performance.

We exited the ~~first~~third quarter of 2021 with ~~$4.9~~$5.3 billion of liquidity, comprised of ~~$1.9~~$2.3 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~~

August 2023. We currently have approximately ~~50%~~45% and ~~60%~~50% of our remaining 2021 oil and gas production hedged, respectively, and 20% and 30% of our 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 $1.0 billion of our common shares through the end of 2022. Additionally, we continue funding our fixed plus variable dividends, which have grown 13%, 44% and 71% over the past three quarters, respectively, including the recently declared dividend payable in the fourth quarter of 2021.

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 discontinued operations or noncontrolling interests.

Our ~~first~~third quarter 2021 net earnings were ~~$216~~$844 million, compared to a net ~~loss~~earnings of ~~$73~~$261 million for the ~~fourth~~second quarter of ~~2020.~~2021. The graph below shows the change in ~~the~~ net earnings ~~(loss)~~ from the ~~fourth~~second quarter of ~~2020~~2021 to the ~~first~~third quarter of 2021. The material changes are further discussed by category on the following pages.

Production Volumes

	Q1 2021		% of Total			Q4 2020		Change			Q3 2021		% of Total			Q2 2021		Change
Oil (MBbls/d)
Delaware Basin		172		64	%		99		+73	%		213		70	%		191		+11	%
Anadarko Basin		13		5	%		16		- 22	%		14		5	%		17		- 15	%
Williston Basin		44		17	%		—	N/M				39		13	%		46		- 15	%
Eagle Ford		16		6	%		18		- 10	%		20		6	%		18		+11	%
Powder River Basin		17		6	%		16		+6	%		14		5	%		16		- 13	%
Other		6		2	%		7		- 15	%		3		1	%		3		+1	%
Total		268		100	%		156		+71	%		303		100	%		291		+4	%

	Q1 2021		% of Total			Q4 2020		Change			Q3 2021		% of Total			Q2 2021		Change
Gas (MMcf/d)
Delaware Basin		471		60	%		267		+77	%		578		62	%		513		+13	%
Anadarko Basin		200		25	%		233		- 14	%		219		23	%		225		- 3	%
Williston Basin		49		6	%		—	N/M				59		6	%		61		- 4	%
Eagle Ford		47		6	%		60		- 21	%		67		7	%		59		+14	%
Powder River Basin		21		3	%		22		- 4	%		19		2	%		21		- 10	%
Other		3		0	%		2		+37	%		1		0	%		2		- 45	%
Total		791		100	%		584		+35	%		943		100	%		881		+7	%

	Q1 2021		% of Total			Q4 2020		Change			Q3 2021		% of Total			Q2 2021		Change
NGLs (MBbls/d)
Delaware Basin		60		61	%		43		+41	%		100		68	%		82		+23	%
Anadarko Basin		21		21	%		25		- 16	%		25		17	%		26		- 4	%
Williston Basin		8		8	%		—	N/M				9		6	%		9		- 3	%
Eagle Ford		6		6	%		9		- 31	%		11		7	%		9		+25	%
Powder River Basin		3		3	%		3		+6	%		3		2	%		3		- 4	%
Other		1		1	%		—	N/M				—		0	%		—	N/M
Total		99		100	%		80		+24	%		148		100	%		129		+15	%

	Q1 2021		% of Total			Q4 2020		Change			Q3 2021		% of Total			Q2 2021		Change
Combined (MBoe/d)
Delaware Basin		310		62	%		186		+67	%		409		67	%		358		+14	%
Anadarko Basin		68		14	%		81		- 16	%		75		12	%		80		- 6	%
Williston Basin		61		12	%		—	N/M				58		10	%		66		- 12	%
Eagle Ford		30		6	%		37		- 18	%		42		7	%		37		+15	%
Powder River Basin		23		5	%		22		+4	%		20		3	%		22		- 12	%
Other		7		1	%		7		-4	%		4		1	%		4		+0	%
Total		499		100	%		333		+50	%		608		100	%		567		+7	%

From the ~~fourth~~second quarter of ~~2020~~2021 to the ~~first~~third quarter of 2021, the change in volumes contributed to a ~~$445~~$149 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~~new well activity 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 wereEagle Ford which was partially offset by ~~impacts of the February 2021 winter storm. Volumes~~lower volumes in the ~~second quarter are expected to range from approximately 538 to 561 MBoe/d.~~Anadarko, Williston and Powder River Basins.

	Q1 2021			Realization	Q4 2020		Change			Q3 2021			Realization	Q2 2021			Change
Gas (per Mcf)
Henry Hub index	$	2.71			$	2.67		+1	%
NGLs (per Bbl)
WTI index										$	70.64			$	66.04			+7	%
Realized price, unhedged	$	2.91		107%	$	1.96		+48	%	$	31.25		44%	$	23.89			+31	%
Cash settlements	$	(0.15	)		$	—				$	(0.45	)		$	(0.25	)
Realized price, with hedges	$	2.76		102%	$	1.96		+41	%	$	30.80		44%	$	23.64			+30	%

	Q1 2021			Q4 2020			Change			Q3 2021			Q2 2021			Change
Combined (per Boe)
Realized price, unhedged	$	39.84		$	25.63			+55	%	$	47.08		$	41.75			+13	%
Cash settlements	$	(5.17	)	$	(0.86	)				$	(6.60	)	$	(7.11	)
Realized price, with hedges	$	34.67		$	24.77			+40	%	$	40.48		$	34.64			+17	%

From the ~~fourth quarter of 2020 to the first~~second quarter of 2021 ~~field~~to the third quarter of 2021, realized prices contributed to a ~~$557~~$332 million increase in earnings. Unhedged realized oil, gas and NGL prices increased primarily due to higher WTI, Henry Hub and Mont Belvieu index prices. ~~The increase in index prices was partially offset by a decrease in hedge cash settlements related to all products.~~

We currently have approximately ~~50%~~45% of our remaining 2021 oil production hedged with an average floor price of $40/Bbl and approximately ~~60%~~50% of our remaining 2021 gas production hedged with an average floor price of ~~$2.56/~~$2.60/Mcf. We ~~are continuing to build~~currently have approximately 20% of our ~~2021~~2022 oil production hedged with an average floor price of $45/Bbl and approximately 30% of our 2022 ~~hedge positions at market prices.~~gas production hedged with an average floor price of $2.70/Mcf.

	Q1 2021			Q4 2020			Change			Q3 2021			Q2 2021			Change
	Q									Q
Oil	$	(220	)	$	(27	)		- 715	%	$	(296	)	$	(352	)		+16	%
Natural gas		(10	)		—		N/M				(68	)		(12	)	N/M
NGL		(2	)		—		N/M				(6	)		(3	)		- 100	%
Total cash settlements ⁽¹⁾	$	(232	)	$	(27	)		- 759	%	$	(370	)	$	(367	)		- 1	%

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

Production Expenses

	Q1 2021			Q4 2020			Change			Q3 2021			Q2 2021			Change
LOE	$	199		$	91			+119	%	$	215		$	210			+2	%
Gathering, processing & transportation		160			130			+23	%		157			147			+7	%
Production taxes		117			47			+149	%		176			143			+23	%
Property taxes		13			3			+333	%		7			13			- 46	%
Total	$	489		$	271			+80	%	$	555		$	513			+8	%
Per Boe:
LOE	$	4.44		$	2.97			+49	%	$	3.85		$	4.06			- 5	%
Gathering, processing & transportation	$	3.57		$	4.23			- 16	%	$	2.81		$	2.85			- 1	%
Percent of oil, gas and NGL sales:
Production taxes		6.5	%		6.1	%		+8	%		6.7	%		6.7	%		- 0	%

Production expenses increased from the ~~fourth~~second quarter of ~~2020~~2021 to the ~~first~~third quarter of 2021 primarily due to new well activity in the Merger closing on January 7, 2021. Partially offsetting increases to gathering, processing and transportation costs were approximately $20 million of Anadarko volume commitments which expired at the end of 2020. LOE per Boe increased due to a different post-Merger asset mix as well as impacts from the February 2021 winter storm.Delaware Basin. Production taxes also increased due to the rise in commodity prices.

Field-Level Cash Margin

The table below presents the field-level cash margin for each of our operating areas. Field-level cash margin is computed as oil, gas and NGL sales less production expenses and is not ~~prepared in accordance with~~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		Q3 2021		$ per BOE		Q2 2021		$ per BOE
Field-level cash margin (non-GAAP)
Field-level cash margin (Non-GAAP)
Delaware Basin	$	895	$	32.07	$	344	$	20.08	$	1,480	$	39.28	$	1,102	$	33.79
Anadarko Basin		85	$	14.01		61	$	8.28		174	$	25.20		145	$	19.86
Williston Basin		161	$	29.70		—	N/M			192	$	36.12		197	$	32.98
Eagle Ford		72	$	26.57		58	$	17.13		147	$	37.81		106	$	31.88
Powder River Basin		67	$	31.99		38	$	18.69		69	$	38.18		74	$	36.78
Other		19	$	28.21		13	$	18.35		18	$	49.53		17	$	42.85
Total	$	1,299	$	28.95	$	514	$	16.77	$	2,080	$	37.17	$	1,641	$	31.79

	Q1 2021		Q4 2020		Change			Q3 2021		Q2 2021		Change
Oil and gas per Boe	$	9.78	$	9.04		+8	%	$	9.85	$	9.88		- 0	%

Oil and gas	$	439	$	278		+58	%	$	551	$	510		+8	%
Other property and equipment		28		23		+20	%		27		26		+4	%
Total	$	467	$	301		+55	%	$	578	$	536		+8	%

Asset impairments	$	—	$	27	N/M

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

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~~second quarter of 2021 includes $65 million ~~gain~~related to the re-valuation of contingent earnout payments associated with our ~~debt retirements in the first quarter of 2021.~~divested Barnett Shale assets. 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, see~~ ~~Note 6~~ ~~in “Part I. Financial Information – Item 1. Financial Statements” in this report.~~

Our ~~first quarter~~nine months ended September 30, 2021 net earnings ~~was $216 million,~~were $1.3 billion, compared to a net loss of ~~$1.7~~$2.5 billion (excludes discontinued operations) for the ~~first quarter of~~nine months ended September 30, 2020. The graph below shows the change in the net earnings (loss) from the ~~first quarter of~~nine months ended September 30, 2020 to the ~~first quarter of~~nine months ended September 30, 2021. The material changes are further discussed by category on the following pages.

Production Volumes

											Nine Months Ended September 30,
	Q1 2021		% of Total			Q1 2020		Change			2021		% of Total			2020		Change
Oil (MBbls/d)
Delaware Basin		172		64	%		84		+105	%		192		67	%		80		+140	%
Anadarko Basin		13		5	%		24		- 45	%		14		5	%		21		- 32	%
Williston Basin		44		17	%		—	N/M				43		15	%		—	N/M
Eagle Ford		16		6	%		26		- 39	%		18		6	%		25		- 29	%
Powder River Basin		17		6	%		21		- 22	%		16		5	%		20		- 23	%
Other		6		2	%		8		- 27	%		4		2	%		8		- 42	%
Total		268		100	%		163		+64	%		287		100	%		154		+87	%

											Nine Months Ended September 30,
	Q1 2021		% of Total			Q1 2020		Change			2021		% of Total			2020		Change
Gas (MMcf/d)
Delaware Basin		471		60	%		244		+93	%		521		60	%		241		+116	%
Anadarko Basin		200		25	%		272		- 26	%		215		25	%		258		- 17	%
Williston Basin		49		6	%		—	N/M				56		6	%		—	N/M
Eagle Ford		47		6	%		86		- 45	%		57		7	%		82		- 30	%
Powder River Basin		21		3	%		29		- 27	%		21		2	%		24		- 14	%
Other		3		0	%		3		- 26	%		2		0	%		4		- 48	%
Total		791		100	%		634		+25	%		872		100	%		609		+43	%

											Nine Months Ended September 30,
	Q1 2021		% of Total			Q1 2020		Change			2021		% of Total			2020		Change
NGLs (MBbls/d)
Delaware Basin		60		61	%		37		+61	%		81		65	%		35		+132	%
Anadarko Basin		21		21	%		30		- 28	%		24		19	%		28		- 16	%
Williston Basin		8		8	%		—	N/M				9		7	%		—	N/M
Eagle Ford		6		6	%		9		- 30	%		9		7	%		11		- 18	%
Powder River Basin		3		3	%		3		+1	%		3		2	%		3		+0	%
Other		1		1	%		1		- 8	%		—		0	%		1		- 100	%
Total		99		100	%		80		+24	%		126		100	%		78		+62	%

											Nine Months Ended September 30,
	Q1 2021		% of Total			Q1 2020		Change			2021		% of Total			2020		Change
Combined (MBoe/d)
Delaware Basin		310		62	%		162		+92	%		360		64	%		155		+132	%
Anadarko Basin		68		14	%		98		- 31	%		74		13	%		92		- 20	%
Williston Basin		61		12	%		—	N/M				61		11	%		—	N/M
Eagle Ford		30		6	%		50		- 39	%		36		7	%		50		- 27	%
Powder River Basin		23		5	%		29		- 20	%		22		4	%		27		- 19	%
Other		7		1	%		9		- 17	%		5		1	%		9		- 43	%
Total		499		100	%		348		+43	%		558		100	%		333		+68	%

From the ~~first quarter of~~nine months ended 2020 to the ~~first quarter of~~nine months ended 2021, the change in volumes contributed to a ~~$446 million~~$1.5 billion increase in earnings. Due to the Merger closing on January 7, 2021, volumes now include WPX legacy assets in the Delaware Basin in Texas and New Mexico and the Williston Basin in North Dakota. Volumes associated with these WPX legacy assets were approximately ~~200~~225 MBoe/d infor the ~~first quarter of~~nine months ended 2021. Continued development of Devon legacy assets in the Delaware Basin also increased volumes. These increases were partially offset by ~~impacts of the February 2021 winter storm and~~ reduced activity across Devon’s remaining legacy assets.

										Nine Months Ended September 30,
	Q1 2021			Realization	Q1 2020		Change			2021			Realization	2020		Change
Gas (per Mcf)
Henry Hub index	$	2.71			$	1.95		+39	%	$	3.19			$	1.88		+70	%
Realized price, unhedged	$	2.91		107%	$	1.21		+141	%	$	2.93		92%	$	1.32		+122	%
Cash settlements	$	(0.15	)		$	0.36				$	(0.38	)		$	0.24
Realized price, with hedges	$	2.76		102%	$	1.57		+76	%	$	2.55		80%	$	1.56		+63	%

										Nine Months Ended September 30,
	Q1 2021			Realization	Q1 2020		Change			2021			Realization	2020		Change
NGLs (per Bbl)
Mont Belvieu blended index ⁽¹⁾	$	25.81			$	14.39		+79	%
WTI index										$	64.85			$	38.57		+68	%
Realized price, unhedged	$	25.01		97%	$	10.40		+140	%	$	27.11		42%	$	10.66		+154	%
Cash settlements	$	(0.20	)		$	0.61				$	(0.32	)		$	0.25
Realized price, with hedges	$	24.81		96%	$	11.01		+125	%	$	26.79		41%	$	10.91		+146	%

									Nine Months Ended September 30,
	Q1 2021			Q1 2020		Change			2021			2020		Change
Combined (per Boe)
Realized price, unhedged	$	39.84		$	25.43		+57	%	$	42.94		$	20.91		+105	%
Cash settlements	$	(5.17	)	$	3.20				$	(6.35	)	$	3.76
Realized price, with hedges	$	34.67		$	28.63		+21	%	$	36.59		$	24.67		+48	%

From the ~~first quarter of~~nine months ended 2020 to the ~~first quarter of~~nine months ended 2021, ~~field~~realized prices contributed to a ~~$535 million~~$3.1 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.~~products in the first nine months of 2021.

	Q1 2021			Q1 2020		Change			Nine Months Ended September 30,
	Q								2021			2020		Change
Oil	$	(220	)	$	76		- 389	%	$	(868	)	$	298	N/M
Natural gas		(10	)		21		- 148	%		(90	)		40	N/M
NGL		(2	)		4		- 150	%		(11	)		5	N/M
Total cash settlements ⁽¹⁾	$	(232	)	$	101		- 330	%	$	(969	)	$	343	N/M

Production Expenses

										Nine Months Ended September 30,
	Q1 2021			Q1 2020			Change			2021			2020			Change
LOE	$	199		$	126			+58	%	$	624		$	334			+87	%
Gathering, processing & transportation		160			130			+23	%		433			378			+15	%
Production taxes		117			56			+109	%		436			123			+254	%
Property taxes		13			6			+117	%		33			17			+94	%
Total	$	489		$	318			+54	%	$	1,526		$	852			+79	%
Per Boe:
LOE	$	4.44		$	3.96			+12	%	$	4.09		$	3.66			+12	%
Gathering, processing & transportation	$	3.57		$	4.11			- 13	%	$	2.84		$	4.15			- 31	%
Percent of oil, gas and NGL sales:
Production taxes		6.5	%		6.9	%		- 5	%		6.7	%		6.4	%		+4	%

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. For additional information, see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report. Partially offsetting increases to gathering, processing and transportation costs were approximately ~~$10~~$39 million of Anadarko volume commitments which expired at the end of 2020. Production taxes also increased due to the rise in commodity prices.

Field-Level Cash Margin

	Q1 2021		$ per BOE		Q1 2020		$ per BOE		Nine Months Ended September 30,
Field-level cash margin (non-GAAP)
									2021		$ per BOE		2020		$ per BOE
Field-level cash margin (Non-GAAP)
Delaware Basin	$	895	$	32.07	$	260	$	17.72	$	3,477	$	35.41	$	602	$	14.16
Anadarko Basin		85	$	14.01		74	$	8.22		404	$	19.93		143	$	5.62
Williston Basin		161	$	29.70		—	N/M			550	$	32.91		—	N/M
Eagle Ford		72	$	26.57		87	$	19.20		325	$	32.74		170	$	12.54
Powder River Basin		67	$	31.99		54	$	20.48		210	$	35.53		121	$	16.45
Other		19	$	28.21		14	$	15.55		54	$	37.69		21	$	8.77
Total	$	1,299	$	28.95	$	489	$	15.41	$	5,020	$	32.93	$	1,057	$	11.58

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

information, see Note 3 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

The following table presents the major changes in cash and cash equivalents for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020.

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020
Operating cash flow from continuing operations	$	592		$	529		$	1,598		$	427		$	3,283		$	1,106
WPX acquired cash		344			—			—			—			344			—
Divestitures of property and equipment		15			25			1			1			65			29
Capital expenditures		(499	)		(425	)		(474	)		(204	)		(1,477	)		(936	)
Debt activity, net		(560	)		—			—			—			(1,302	)		—
Repurchases of common stock		—			(38	)		—			—			—			(38	)
Common stock dividends		(203	)		(34	)		(329	)		(43	)		(761	)		(119	)
Noncontrolling interest activity, net		(28	)		2			(5	)		(3	)		(35	)		2
Other		(20	)		(21	)		(9	)		—			(33	)		(22	)
Net change in cash, cash equivalents and restricted cash from discontinued operations		—			(155	)		—			50			—			31
Net change in cash, cash equivalents and restricted cash	$	(359	)	$	(117	)	$	782		$	228		$	84		$	53
Cash, cash equivalents and restricted cash at end of period	$	1,878		$	1,727		$	2,321		$	1,897		$	2,321		$	1,897

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%~~nearly tripled during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2020. The increase was due to the Merger and prices significantly increasing in the first ~~quarter~~nine months of 2021. ~~Despite~~Additionally, 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.

During the first ~~three~~nine months of 2021, we sold non-core ~~U.S.~~ assets for approximately ~~$15~~$65 million, net of customary purchase price adjustments. For additional information, please see Note 2 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

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

	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		2021		2020
Delaware Basin	$	397	$	221	$	375	$	147	$	1,150	$	560
Anadarko Basin		9		8		11		2		29		20
Williston Basin		28		—		13		—		59		—
Eagle Ford		14		94		45		17		88		153
Powder River Basin		33		85		13		24		53		155
Other		—		3		1		3		1		9
Total oil and gas		481		411		458		193		1,380		897
Midstream		5		8		5		7		53		26
Other		13		6		11		4		44		13
Total capital expenditures	$	499	$	425	$	474	$	204	$	1,477	$	936

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~~include activity related to WPX legacy assets in the Delaware Basin in Texas and New Mexico and the

Williston Basin in North Dakota. Our capital program is designed to operate within ~~or near~~ operating cash flow. This is evidenced by our operating cash flow funding all of our capital expenditures for the ~~three~~nine months ended ~~March 31,~~September 30, 2021. Our capital investment program is driven by a disciplined allocation process focused on returns. ~~Our capital expenditures are expected to range between $1.7 billion to $2.0 billion for the full year 2021.~~

Subsequent to the Merger closing, we redeemed ~~$43 million~~$1.2 billion of ~~6.00% notes, $175 million of 5.875% notes and $315 million of 4.50%~~senior notes in the first ~~quarter~~nine months of 2021. We also paid ~~$27~~$59 million of cash retirement costs related to these redemptions.

~~As part of~~The following table summarizes 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 third quarter and total for the first ~~three~~nine months of 2021 and ~~2020, respectively.~~2020. 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~~each quarter of 2021.

We repurchased 2.2 million shares of common stock for $38 million in the first ~~three~~nine months of 2020. For additional information, see Note 1716 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

During the first ~~three~~nine months of 2021, we ~~did not~~ ~~receive any~~received $4 million of contributions from our noncontrolling interests in CDM and distributed $4$15 million 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.

During the first nine months of 2020, we received $12 million in contributions from our noncontrolling interests in CDM and distributed $10 million to our noncontrolling interests in CDM.

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~~accelerated 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~~enhanced Devon’s free cash flow, credit profile and ~~decrease~~decreased 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.

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~~third quarter of 2021, we held approximately ~~$1.9~~$2.3 billion of cash, inclusive of ~~$195~~$177 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 may differ from our expectations.

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

To mitigate some of the risk inherent in prices, we utilize various derivative financial instruments to protect a portion of our production against downside price risk. 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,~~September 30, 2021 are presented in Note 3 in “Part I. Financial Information – Item 1. Financial Statements” of this report.

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

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

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

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

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

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~~$1.2 billion in the first ~~quarter~~half 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.

As of ~~March 31,~~September 30, 2021, we had approximately $3.0 billion of available borrowing capacity under our Senior Credit Facility. This credit facility supports our $3.0 billion of short-term credit under our commercial paper program. At ~~March 31,~~September 30, 2021, there were no borrowings under our commercial paper program, and we were in compliance with the Senior Credit Facility’s financial covenant.

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

Following the closing of the Merger, ~~Devon~~we initiated a new “fixed plus variable” dividend strategy. The fixed dividend is currently paid quarterly at a rate of $0.11 per share, and ~~the~~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 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.

Our 2021 exploration and development budget for the ~~remainder~~fourth quarter of 2021 is expected to range from approximately ~~$1.1~~$440 million to $490 million.

In November 2021, our Board of Directors authorized a $1.0 billion ~~to $1.3 billion.~~share repurchase program, which expires December 31, 2022.

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~~partial valuation allowance position at ~~March 31,~~September 30, 2021. ~~However~~S, ~~absent~~ubject to any additional objective negative evidence ~~and with~~or the addition of subjective evidence such as forecasted ~~taxable~~ income, weDevon may continue to adjust the valuation allowance on its deferred tax assets 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 for Devon, but the Merger did cause an ownership change for WPX and increased the likelihood Devon could experience an ownership change over the next three years.

Periodically we acquire assets and assume liabilities in transactions accounted for as business combinations, such as the Merger with WPX. In connection with the Merger, as the accounting acquirer, we allocated the $5.4 billion of 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

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.~~Catalyst. 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~~judgments 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 Annual Report on Form 10-K.

We make reference to “core earnings (loss) attributable to Devon” and “core earnings (loss) per share attributable to Devon” in “Overview of 2021 Results” in this Item 2 that are not required by or presented in accordance with GAAP. These non-GAAP measures are not alternatives to GAAP measures and should not be considered in isolation or as a substitute for analysis of our results reported under GAAP. Core earnings (loss) attributable to Devon, as well as the per share amount, represent net earnings excluding certain 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, changes in tax legislation, 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 6.

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

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

	Three Months Ended March 31,												Three Months Ended September 30,												Nine Months Ended September 30,
	Before tax			After tax			After Noncontrolling Interests			Per Diluted Share			Before Tax			After Tax			After Noncontrolling Interests			Per Diluted Share			Before Tax			After Tax			After Noncontrolling Interests			Per Diluted Share
2021
Total
Earnings (loss) attributable to Devon (GAAP)	$	(32	)	$	216		$	213		$	0.32
Earnings attributable to Devon (GAAP)													$	964		$	844		$	838		$	1.24		$	1,236		$	1,321		$	1,307		$	1.95
Adjustments:
Asset dispositions		(32	)		(24	)		(24	)		(0.04	)		—			—			—			—			(119	)		(91	)		(91	)		(0.13	)
Asset and exploration impairments		1			—			—			0.00			1			1			1			0.00			3			2			2			0.00
Deferred tax asset valuation allowance		—			(263	)		(263	)		(0.40	)		—			(101	)		(101	)		(0.15	)		—			(479	)		(479	)		(0.71	)
Change in tax legislation														—			—			—			—			—			62			62			0.09
Fair value changes in financial instruments and foreign currency		294			225			225			0.34			(31	)		(23	)		(23	)		(0.04	)		597			460			460			0.68
Restructuring and transaction costs		189			162			162			0.25			18			18			18			0.03			230			201			201			0.29
Early retirement of debt		(20	)		(15	)		(15	)		(0.02	)		—			—			—			—			(30	)		(23	)		(23	)		(0.03	)
Core earnings attributable to Devon (Non-GAAP)	$	400		$	301		$	298		$	0.45		$	952		$	739		$	733		$	1.08		$	1,917		$	1,453		$	1,439		$	2.14
2020
Continuing Operations
Loss attributable to Devon (GAAP)	$	(2,107	)	$	(1,690	)	$	(1,691	)	$	(4.48	)	$	(193	)	$	(103	)	$	(105	)	$	(0.29	)	$	(2,980	)	$	(2,470	)	$	(2,475	)	$	(6.58	)
Adjustments:
Asset and exploration impairments		2,776			2,146			2,146			5.66			36			29			29			0.08			2,816			2,178			2,178			5.80
Deferred tax asset valuation allowance		—			108			108			0.28			—			(5	)		(5	)		(0.01	)		—			252			252			0.65
Fair value changes in financial instruments		(619	)		(479	)		(479	)		(1.24	)		97			74			74			0.19			71			55			55			0.14
Change in tax legislation		—			(62	)		(62	)		(0.16	)		—			(43	)		(43	)		(0.11	)		—			(105	)		(105	)		(0.27	)
Core earnings attributable to Devon (Non-GAAP)	$	50		$	23		$	22		$	0.06
Restructuring and transaction costs														32			25			25			0.07			32			25			25			0.06
Core loss attributable to Devon (Non-GAAP)													$	(28	)	$	(23	)	$	(25	)	$	(0.07	)	$	(61	)	$	(65	)	$	(70	)	$	(0.20	)
Discontinued Operations
Loss attributable to Devon (GAAP)	$	(157	)	$	(125	)	$	(125	)	$	(0.34	)
Earnings (loss) attributable to Devon (GAAP)													$	(2	)	$	13		$	13		$	0.04		$	(150	)	$	(103	)	$	(103	)	$	(0.27	)
Adjustments:
Asset dispositions														—			—			—			—			(2	)		(1	)		(1	)		(0.00	)
Asset impairments		179			141			141			0.38			3			3			3			0.00			182			143			143			0.37
Fair value changes in foreign currency and other		10			10			10			0.03			(2	)		(3	)		(3	)		(0.01	)		4			2			2			0.01
Core earnings attributable to Devon (Non-GAAP)	$	32		$	26		$	26		$	0.07
Core earnings (loss) attributable to Devon (Non-GAAP)													$	(1	)	$	13		$	13		$	0.03		$	34		$	41		$	41		$	0.11
Total
Loss attributable to Devon (GAAP)	$	(2,264	)	$	(1,815	)	$	(1,816	)	$	(4.82	)	$	(195	)	$	(90	)	$	(92	)	$	(0.25	)	$	(3,130	)	$	(2,573	)	$	(2,578	)	$	(6.85	)
Adjustments:
Continuing Operations		2,157			1,713			1,713			4.54			165			80			80			0.22			2,919			2,405			2,405			6.38
Discontinued Operations		189			151			151			0.41			1			—			—			(0.01	)		184			144			144			0.38
Core earnings attributable to Devon (Non-GAAP)	$	82		$	49		$	48		$	0.13
Core loss attributable to Devon (Non-GAAP)													$	(29	)	$	(10	)	$	(12	)	$	(0.04	)	$	(27	)	$	(24	)	$	(29	)	$	(0.09	)

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.

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

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020			2021			2020
Net earnings (loss) (GAAP)	$	216		$	(1,815	)	$	844		$	(90	)	$	1,321		$	(2,573	)
Net loss from discontinued operations, net of tax		—			125
Net (earnings) loss from discontinued operations, net of tax								—			(13	)		—			103
Financing costs, net		77			65			86			66			243			200
Income tax benefit		(248	)		(417	)
Income tax expense (benefit)								120			(90	)		(85	)		(510	)
Exploration expenses		3			112			3			39			9			163
Depreciation, depletion and amortization		467			401			578			299			1,581			999
Asset impairments		—			2,666			—			—			—			2,666
Asset dispositions		(32	)		—			—			—			(119	)		—
Share-based compensation		20			20			18			19			58			58
Derivative and financial instrument non-cash valuation changes		296			(619	)		(35	)		97			597			71
Restructuring and transaction costs		189			—			18			32			230			32
Accretion on discounted liabilities and other		(29	)		(48	)		2			—			(41	)		(35	)
EBITDAX (non-GAAP)		959			490
EBITDAX (Non-GAAP)								1,634			359			3,794			1,174
Marketing and midstream revenues and expenses, net		21			18			(1	)		2			19			28
Commodity derivative cash settlements		232			(101	)		370			(10	)		969			(343	)
General and administrative expenses, cash-based		87			82			77			56			238			198
Field-level cash margin (non-GAAP)	$	1,299		$	489
Field-level cash margin (Non-GAAP)							$	2,080		$	407		$	5,020		$	1,057

As of ~~March 31,~~September 30, 2021, we have commodity derivatives that pertain to a portion of our estimated production for the last ~~nine~~three months of 2021, 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,~~September 30, 2021, a 10% change in the forward curves associated with our commodity derivative instruments would have changed our net positions by approximately ~~$335~~$280 million.

As of ~~March 31,~~September 30, 2021, we had total debt of ~~$7.3~~$6.5 billion. All of our debt is based on fixed interest rates averaging ~~5.6%~~5.7%.

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,~~September 30, 2021 to ensure that the information required to be disclosed by Devon in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.

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

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

We are involved in various legal proceedings incidental to our business. However, to our knowledge as of the date of this report and subject to the ~~matter~~environmental matters noted ~~below,~~in Part II, Item 1. Legal Proceedings of our Second Quarter 2021 Quarterly Report on Form 10-Q, 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.

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

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

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

	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

	Oil Basis Swaps
Period	Index	Volume (Bbls/d)		Weighted Average Differential to WTI ($/Bbl)
Q4 2021	Midland Sweet		23,000	$	0.84
Q4 2021	Guernsey Light Sweet		4,000	$	(1.49	)
Q4 2021	BRENT		1,000	$	(8.00	)
Q4 2021	NYMEX Roll		13,000	$	0.39
Q1-Q4 2022	BRENT		1,000	$	(7.75	)
Q1-Q4 2022	NYMEX Roll		29,000	$	0.45

		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


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

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	13
	Note 4 – Share-Based Compensation	15
	Note 5 – Asset Impairments	16
	Note 6 – Restructuring and Transaction Costs	17
	Note 7 – Income Taxes	18
	Note 8 – Net Earnings (Loss) Per Share From Continuing Operations	19
	Note 9 – Other Comprehensive Earnings (Loss)	19
	Note 10 – Supplemental Information to Statements of Cash Flows	20
	Note 11 – Accounts Receivable	20
	Note 12 – Property, Plant and Equipment	20
	Note 13 – Debt and Related Expenses	21
	Note 14 – Leases	22
	Note 15 – Asset Retirement Obligations	2223
	Note 16 ~~– Other Long-Term Liabilities~~	23
	~~Note 17~~ – Stockholders’ Equity	23
	Note 1817 – Discontinued Operations	24
	Note 1918 – Commitments and Contingencies	25
	Note 2019 – Fair Value Measurements	26
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
	Executive Overview	28
	Results of Operations	30
	Capital Resources, Uses and Liquidity	37
	Critical Accounting Estimates	40
	Non-GAAP Measures	41
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44

Part II. Other Information
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46

Signatures		47

	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

	September 30, 2021									December 31, 2020
	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	$	3		$	(1	)	$	2		$	23		$	(18	)	$	5		Other current assets
Long-term derivative asset		—			—			—			1			—			1		Other long-term assets
Short-term derivative liability		(984	)		1			(983	)		(161	)		18			(143	)	Other current liabilities
Long-term derivative liability		(103	)		—			(103	)		(5	)		—			(5	)	Other long-term liabilities
Total derivative liability	$	(1,084	)	$	—		$	(1,084	)	$	(142	)	$	—		$	(142	)

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

U.S. statutory income tax rate	21	%	21	%	21	%	21	%
State income taxes	0	%	0	%	0	%	1	%
Unrecognized tax benefits	0	%	18	%	0	%	0	%
Deferred tax asset valuation allowance	(9	%)	4	%	(33	%)	(7	%)
Other	0	%	4	%	5	%	2	%
Effective income tax rate	12	%	47	%	(7	%)	17	%

	Total
2022	$	—
2023		242
2024		472
2025		485
2026		—
Thereafter		5,164
Total	$	6,363

	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

	Q1 2021			Q4 2020			Change in earnings			Q3 2021		Q2 2021			Change in earnings
Commodity hedge valuation changes ⁽¹⁾	$	(296	)	$	(90	)	$	(206	)	$	35	$	(336	)	$	371
Marketing and midstream operations		(21	)		(7	)		(14	)		1		1			—
Exploration expenses		3			4			1			3		3			—
Asset dispositions		(32	)		(1	)		31			—		(87	)		(87	)
Net financing costs		77			70			(7	)		86		80			(6	)
Restructuring and transaction costs		189			17			(172	)		18		23			5
Other, net		(29	)		1			30			2		(14	)		(16	)
							$	(337	)						$	267

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

	Q3 2021			Q2 2021
Current expense	$	1		$	19
Deferred expense		119			24
Total expense	$	120		$	43
Effective income tax rate		12	%		14	%

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

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

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

10.1*	~~2021 Form of Notice of Grant of Restricted Stock Award and Award Agreement under the 2017 Long-Term Incentive Plan between Devon Energy Corporation and certain officers for restricted stock awarded.~~

10.2*	2021 Form of Notice of Grant of Performance Share Unit Award and Award Agreement under the 2017 Long-Term Incentive Plan between Devon Energy Corporation and certain officers for performance based restricted share units awarded.

10.3*	~~2021 Amendment (effective as of January 7, 2021) to the Devon Energy Corporation 2017 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.7 to Registrant’s Form 10-K filed February 17, 2021; File No. 001-32318~~).

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

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

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).

				DEVON ENERGY CORPORATION

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