Devon Energy — Third Quarter 2026 Earnings Summary

Financial Performance:

• Reported net earnings of $1.0 billion, or $0.88 per diluted share, for the third quarter of 2026.
• Core earnings (adjusted for items typically excluded by analysts) totaled $1.6 billion, or $1.42 per diluted share.
• Operating cash flow generated was $2.8 billion, the first full quarter of combined operations.
• Adjusted operating cash flow was $3.5 billion, and adjusted free cash flow was $2.0 billion.
• Oil, gas, and NGL sales totaled $5.9 billion for the quarter.
• Cash costs (including production, G&A, and financing) were $12.89 per Boe, approximately 2% below the midpoint of guidance.
• Gathering, processing, and transportation expenses were $3.20 per Boe; general and administrative expenses were $1.18 per Boe.
• Lease operating expenses were slightly above the quarterly guidance range due to higher workover activity and third-party water disposal.
• Realized prices including hedges were $79.54 per barrel of oil, $23.81 per barrel of NGL, and $2.16 per Mcf of natural gas.
• Unhedged natural gas realizations improved to 66% of Henry Hub, above the guidance range.
• Outstanding debt totaled $10.6 billion, with net debt of $10.2 billion (0.9 times trailing twelve-month EBITDAX).
• Cash balance at quarter-end was $0.4 billion, with an undrawn credit facility of $3.0 billion.
• Total debt reduction since the merger close reached $1.25 billion, including the retirement of the remaining $750 million term loan.

Guidance and Future Outlook:

• Reaffirmed full-year 2026 production and capital guidance with the Eagle Ford included through closing.
• Q4 2026 total production guidance is 1,660,000 to 1,700,000 Boe per day; oil production guidance is 550,000 to 560,000 barrels per day.
• Q4 2026 capital spending guidance is $1,290 million to $1,395 million.
• Provided initial 2027 outlook on a pro forma basis (adjusted for the Eagle Ford sale):
  • Expected oil production of approximately 525,000 barrels per day.
  • Expected total production of approximately 1,600,000 Boe per day.
  • Expected total capital of approximately $5.3 billion.
• Plans to retire an additional $1.5 billion of long-term debt in early 2027 to reach a $9 billion gross debt target.
• Synergy outlook raised to an expected year-end 2026 run rate of approximately $350 million (75% above the August plan of $200 million).
• Expected average synergies in 2027 are $700 million, up from the prior $600 million outlook.
• Target of at least $1.0 billion in annual pre-tax synergies by year-end 2027.
• Full 2027 guidance will be provided with fourth-quarter results in February.

Business Segments and Product Lines:

• Operated drilling activity averaged 32 rigs and 8 completion crews in the third quarter.
• Placed 124 net operated wells online with an average lateral length of 11,400 feet.
• Total production averaged 1,668,000 Boe per day.
• Oil production was 553,000 barrels per day; NGLs were 382,000 barrels per day; natural gas was 4.4 Bcf per day.
• Permian Basin oil production led the portfolio at 389,000 barrels per day.
• Eagle Ford oil volumes were below expectations due to completion timing but offset by solid performance elsewhere.
• Acquired a 25% interest in the Solitude Pipeline System, securing firm transportation capacity connecting Permian natural gas to the Gulf Coast and LNG-linked pricing.

Market and Competitive Landscape:

• Waha differentials narrowed as additional Permian takeaway capacity commenced service, improving unhedged natural gas realizations.
• The Solitude Pipeline investment is expected to improve realized natural gas prices once the system enters service.
• Merger integration is running ahead of plan, with shared best practices and technology strengthening margins and increasing capital efficiency.

Risks and Challenges:

• Eagle Ford oil volumes were below expectations due to the timing of completions during the quarter.
• Lease operating expenses were slightly above guidance due to higher workover activity and third-party water disposal.
• Forward-looking statements are subject to risks including commodity price volatility, geopolitical instability, trade policy changes, regulatory restrictions, climate change efforts, and the risk of not realizing anticipated merger synergies.

Management Commentary and Tone:

• President and CEO Clay Gaspar published a letter to shareholders highlighting the delivery on 2026 goals and the provision of the initial 2027 outlook.
• Management expressed confidence in the accelerated share repurchase ramp-up, fueled by free cash flow and Eagle Ford sale proceeds.
• The tone regarding merger synergies is positive, noting the run rate is 75% above the previous plan.
• Management emphasized the strategic priority of delivering value through a sustainable, annually growing fixed dividend.

Other Key Points:

• Agreed to sell Eagle Ford assets for $4.2 billion in cash, with closing expected in early 2027; net proceeds after taxes and adjustments are expected to be approximately $3.5 billion.
• Returned $1,530 million to shareholders during the quarter via a $366 million dividend ($0.32 per share), $414 million in share repurchases, and the retirement of the $750 million term loan.
• Declared a fixed quarterly cash dividend of $0.32 per share for the fourth quarter, payable December 30, 2026.
• Repurchased 8.9 million shares for $414 million in the third quarter; total repurchases since the program began in May are 13.3 million shares for $617 million.
• Remaining capacity on the $8.0 billion share repurchase program is $7.4 billion, extending through mid-2029.
• Plans to ramp share repurchases to greater than $1 billion in the fourth quarter with further acceleration in early 2027.
• Capital expenditures, excluding acquisitions, totaled $1,496 million for the quarter.