Devon Energy(DVN) - 2025 Q3 - Quarterly Report

Production and Operations - Production totaled 853 MBoe/d, exceeding guidance by 2%[167] - Total production volumes increased by 20% from 700 MBoe/d in 2024 to 836 MBoe/d in 2025, primarily driven by the Grayson Mill acquisition and new well activity[188] - Oil production increased by 18% from 330 MBbls/d in 2024 to 388 MBbls/d in 2025, with significant growth in the Rockies region, which saw a 116% increase[187] - Total production expenses remained stable at $895 million, with a per Boe cost of $6.14 for LOE[177] - Production expenses rose by 18% from $2.302 billion in 2024 to $2.706 billion in 2025, largely due to increased activity in the Rockies and Delaware Basin[192] - Approximately 30% and 35% of anticipated 2025 oil and gas production are currently hedged, respectively[174] Financial Performance - Generated $1.7 billion of operating cash flow and $6.8 billion for the past twelve trailing months[167] - Earnings attributable to Devon were $687 million, or $1.09 per diluted share[167] - Net earnings for the nine months ended September 30, 2025, were $2.1 billion, a decrease from $2.3 billion for the same period in 2024, reflecting a change of approximately 9%[185] - Realized prices for oil decreased by 10% from $42.19 per Boe in 2024 to $37.86 per Boe in 2025, contributing to an $884 million decrease in earnings[189] - Operating cash flow for Q3 2025 was $1.69 billion, compared to $1.66 billion in Q3 2024, and $5.18 billion for the nine months ended September 30, 2025, compared to $4.94 billion in 2024[204][206] - Core earnings attributable to Devon for the three months ended September 30, 2025, were $856 million, or $1.04 per share[247] - EBITDAX for the three months ended September 30, 2025, was $1.86 billion, reflecting strong operational performance[252] Acquisitions and Investments - The acquisition of the Williston Basin business of Grayson Mill was for approximately $5.0 billion, enhancing oil production and operating scale[163] - Devon issued $3.25 billion of debt in Q3 2024 to partially fund the Grayson Mill acquisition and retired $472 million of debt in the same quarter[201] - On August 1, 2025, Devon acquired all outstanding noncontrolling interests in CDM for $260 million, fully attributing future net income and cash flows to Devon[218] Cash Management and Shareholder Returns - Cash-return objectives include opportunistic share repurchases, funding dividends, and repaying debt, with approximately 83% of the $5.0 billion share repurchase program completed[167] - Devon repurchased approximately 23.7 million shares for $800 million in the first nine months of 2025, compared to 16.3 million shares for $744 million in 2024[215] - A cash dividend of $0.24 per share was announced for the fourth quarter of 2025, totaling approximately $150 million[237] - The Board of Directors has authorized a $5.0 billion share repurchase program, with $4.2 billion executed through October 2025[237] Tax and Regulatory - The effective income tax rate for Q3 2025 was 24%, up from 21% in Q2 2025, influenced by the OBBB legislation[184] - For the nine months ended September 30, 2025, Devon's total income tax expense was $600 million, with an effective income tax rate of 22%[202] Asset Management - The company recognized a pre-tax gain of $307 million from the sale of its investment in Matterhorn, recorded as asset dispositions[183] - Asset impairments totaled $254 million in the first quarter of 2025 due to the rationalization of two headquarters-related real estate assets[196] - In Q2 2025, Devon sold its investment in Matterhorn for $372 million, recognizing a pre-tax gain of $307 million ($239 million net of tax) from the asset disposition[200] - Devon generated $134 million from divesting headquarters-related real estate assets and $372 million from the sale of Matterhorn in the first nine months of 2025[210] Financial Position and Outlook - Total debt as of September 30, 2025, was $8.4 billion, with $7.4 billion in fixed-rate debt averaging 5.7%[255] - As of September 30, 2025, Devon had approximately $3.0 billion of available borrowing capacity under its Senior Credit Facility[233] - The company has a credit rating of BBB from Standard and Poor's, BBB+ from Fitch, and Baa2 from Moody's, all with a stable outlook[234] - Capital expenditures for the first nine months of 2025 totaled $2.76 billion, representing approximately 53% of operating cash flow[208] - Capital expenditures for the remainder of 2025 are expected to be approximately $0.9 billion to $1.0 billion[238] - The capital expenditures budget indicates a focus on maintaining operational efficiency and growth[238] Business Optimization - The business optimization plan is expected to improve annual pre-tax cash flow by $1.0 billion, with $600 million anticipated to be completed by the end of 2025[166] - Devon's business optimization plan is expected to improve annual pre-tax cash flow by $1.0 billion, with $600 million anticipated to be achieved by the end of 2025[223] Market Conditions - Realized price for oil (unhedged) increased to $63.21 per Bbl, a 2% increase from Q2 2025[173] - Field-level cash margin increased to $24.41 per Boe, up from $23.68 in Q2 2025[179] - Cash settlements from hedges totaled $107 million in the first nine months of 2025, a decrease of 23% compared to $139 million in 2024[190] - A 10% change in the forward curves of commodity derivatives would have impacted net positions by approximately $200 million[254] - The company’s Field-Level Cash Margin for the nine months ended September 30, 2025, was $5.94 billion[252]