Energy Prospectus

Devon Energy Corp. (NYSE: DVN) today reported financial and operational results for the third-quarter 2024.

KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS
• Delivered $812 million of net earnings, or $1.30 per share; $683 million of core earnings, or $1.10 per share < Core earnings compare to my Net Income forecast of $649 million.
• Achieved 335,000 barrels of oil production per day during the quarter, exceeding guidance by 4 percent < Beat my forecast of 332,500 bbls of oil per day.
> Total companywide production averaged 728,000 oil-equivalent barrels (Boe) per day in the third quarter. This represents a 3 percent increase in production compared to the previous quarter. < Beat my forecast of 700,000 Boepd in Q3.
• Generated $1.7 billion of operating cash flow and $786 million of free cash flow for the third quarter < Beat my forecast of $1.51 billion operating cash flow.
• Repurchased $295 million of common stock during the quarter
• Declared a $0.22 per share quarterly fixed dividend payout
• Closed strategic acquisition on Sept. 27, enhancing scale and transforming Williston Basin business < This is the Grayson Mill acquisition that will increase production by ~80,000 Boepd from Q3 to Q4.

CEO PERSPECTIVE

“Devon delivered another quarter of strong operational and financial results, showcasing the strength of our disciplined strategy,” said Rick Muncrief,
president and CEO. “The Delaware Basin continues to be a great contributor to our success. The exceptional well productivity and cycle time
improvements we continue to see in this basin contributed to production volumes surpassing our guidance while keeping capital expenditures below
forecasted levels.

“Importantly, our reliable operating performance led to another quarter of significant free cash flow generation. This enabled us to return value to our shareholders through our ongoing share buyback program and to take the first step in our debt reduction plan by retiring nearly $500 million of debt at maturity.

“Looking ahead to the remainder of 2024 and into 2025, we enhanced the quality and depth of our asset portfolio with the recent acquisition of Grayson Mill Energy. This transaction marks a major milestone, increasing our operating scale and strengthening our outlook for the fourth quarter and beyond. Coupled with the operational momentum of our legacy business, this acquisition positions Devon to deliver strong returns through the cycle and underscores our commitment to generating long-term value for our shareholders,” Muncrief concluded.

FINANCIAL RESULTS

Devon reported net earnings of $812 million, or $1.30 per diluted share, in the third quarter of 2024. Adjusting for items analysts typically exclude from estimates, the company’s core earnings were $683 million, or $1.10 per diluted share.

Devon’s operating cash flow totaled $1.7 billion in the third quarter, an 8 percent increase versus the prior quarter. The company funded its capital
requirements and had $786 million of free cash flow for the quarter.

In the third quarter, Devon issued $2.25 billion of senior notes through a combination of 10- and 30-year offerings and entered into a $1 billion term
loan. Proceeds from the senior notes, the term loan and a portion of the company’s cash on hand funded the cash portion of Devon’s previously
announced Grayson Mill acquisition.

The company also took the initial step on its debt reduction program by retiring $472 million of outstanding debt at maturity. Overall, Devon’s financial position remained strong with investment-grade credit ratings and cash balances of $676 million. At September 30, 2024, the company’s outstanding debt totaled $8.9 billion with a net debt-to-EBITDAX ratio of 1.1 times.

OPERATING RESULTS

Devon’s capital activity in the third quarter averaged 20 operated drilling rigs and 5 completion crews across its asset portfolio. This level of activity
resulted in 108 gross operated wells being placed online, with an average lateral length of 10,000 feet. Upstream capital spending in the third quarter was $817 million. Midstream, carbon and corporate capital totaled $61 million in the quarter.

Devon’s oil production in the third quarter reached 335,000 barrels per day, exceeding guidance by 4 percent. Total companywide production averaged 728,000 oil-equivalent barrels (Boe) per day in the third quarter. This represents a 3 percent increase in production compared to the previous quarter.

Production in the quarter benefited from the closing of Grayson Mill in late September, which contributed approximately 5,000 Boe per day and 3,000 barrels of oil per day to the quarterly average.

Devon’s growth and outperformance in the third quarter was primarily driven by its Delaware Basin asset, which accounted for 67 percent of
companywide volumes at 488,000 Boe per day. This production result represents a growth rate of 6 percent quarter-over-quarter, driven by 55 gross
operated wells being placed online during the quarter. The outperformance was driven by strong well productivity and base production that continued to exceed expectations.

Capital activity in the Delaware was headlined by the CBR 12-1 project, which was brought online during the second and third quarters of 2024. This
21-well project in the Stateline area targeted 6 different landing zones within the Bone Spring and Wolfcamp formations. Initial 30-day rates from this multi-zone development averaged 3,300 Boe per day, with per well recoveries exceeding 2 million oil-equivalent barrels.

For the third quarter, Devon’s upstream revenues totaled $2.7 billion. The company’s realized price during the period, including commodity hedges, was $40.71 per Boe, compared with the prior quarter of $44.29 per Boe. The lower price realization was primarily driven by reduced crude and natural gas liquids benchmark pricing. Also contributing to the lower pricing was the expanded regional gas price differential in the Delaware Basin driven by infrastructure constraints.

Production costs, including taxes, averaged $11.39 per Boe in the third quarter, a decline of 7 percent from the prior period. The improved cost structure was driven by lower lease operating expenses resulting from more efficient field-level operations, lower well workovers and a decrease in production tax due to lower commodity prices.

Financing cost, net totaled $88 million in the quarter, a $12 million increase from the prior quarter. The higher expense is primarily related to the debt issued in the quarter related to the Grayson Mill acquisition.

Devon’s third quarter effective income tax rate was 22 percent, with a 7 percent current rate and 15 percent deferred rate. The lower-than-expected current tax rate was driven by accelerated income tax depreciation related to the closing of the Grayson Mill acquisition.

STRATEGIC ACQUISITION IN THE WILLISTON BASIN

On Sept. 27, 2024, Devon closed its previously announced acquisition of Grayson Mill Energy. The company issued 37.3 million shares and funded the
remainder of the transaction through a combination of senior notes, a term loan and cash on hand. The acquisition adds a high-margin production mix that enhances Devon’s position as one of the largest oil producers in the U.S. The acquisition also transforms the company’s Williston Basin business, with the addition of 307,000 net acres, 500 undrilled gross locations and 300 high-quality refrac candidates. < I love "Running Room".