false DEVON ENERGY CORP/DE 0001090012 --12-31 Q3 0 0 P2Y10M20D P2Y7M6D P8M12D P1Y8M12D 0001090012 2020-01-01 2020-09-30 xbrli:shares 0001090012 2020-10-21 iso4217:USD 0001090012 dvn:OilGasAndNGLSalesMember 2020-07-01 2020-09-30 0001090012 dvn:OilGasAndNGLSalesMember 2019-07-01 2019-09-30 0001090012 dvn:OilGasAndNGLSalesMember 2020-01-01 2020-09-30 0001090012 dvn:OilGasAndNGLSalesMember 2019-01-01 2019-09-30 0001090012 2020-07-01 2020-09-30 0001090012 2019-07-01 2019-09-30 0001090012 2019-01-01 2019-09-30 0001090012 dvn:MarketingAndMidstreamRevenuesMember 2020-07-01 2020-09-30 0001090012 dvn:MarketingAndMidstreamRevenuesMember 2019-07-01 2019-09-30 0001090012 dvn:MarketingAndMidstreamRevenuesMember 2020-01-01 2020-09-30 0001090012 dvn:MarketingAndMidstreamRevenuesMember 2019-01-01 2019-09-30 0001090012 dvn:MarketingAndMidstreamExpensesMember 2020-07-01 2020-09-30 0001090012 dvn:MarketingAndMidstreamExpensesMember 2019-07-01 2019-09-30 0001090012 dvn:MarketingAndMidstreamExpensesMember 2020-01-01 2020-09-30 0001090012 dvn:MarketingAndMidstreamExpensesMember 2019-01-01 2019-09-30 iso4217:USD xbrli:shares 0001090012 2020-06-30 0001090012 2019-06-30 0001090012 2019-12-31 0001090012 2018-12-31 0001090012 2020-09-30 0001090012 2019-09-30 0001090012 dvn:CottonDrawMidstreamMember 2020-09-30 0001090012 dvn:CottonDrawMidstreamMember 2019-12-31 0001090012 us-gaap:CommonStockMember 2020-06-30 0001090012 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0001090012 us-gaap:RetainedEarningsMember 2020-06-30 0001090012 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30 0001090012 us-gaap:NoncontrollingInterestMember 2020-06-30 0001090012 us-gaap:RetainedEarningsMember 2020-07-01 2020-09-30 0001090012 us-gaap:NoncontrollingInterestMember 2020-07-01 2020-09-30 0001090012 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-07-01 2020-09-30 0001090012 us-gaap:TreasuryStockMember 2020-07-01 2020-09-30 0001090012 us-gaap:AdditionalPaidInCapitalMember 2020-07-01 2020-09-30 0001090012 us-gaap:CommonStockMember 2020-09-30 0001090012 us-gaap:AdditionalPaidInCapitalMember 2020-09-30 0001090012 us-gaap:RetainedEarningsMember 2020-09-30 0001090012 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-09-30 0001090012 us-gaap:NoncontrollingInterestMember 2020-09-30 0001090012 us-gaap:CommonStockMember 2019-06-30 0001090012 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0001090012 us-gaap:RetainedEarningsMember 2019-06-30 0001090012 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0001090012 us-gaap:TreasuryStockMember 2019-06-30 0001090012 us-gaap:RetainedEarningsMember 2019-07-01 2019-09-30 0001090012 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-07-01 2019-09-30 0001090012 us-gaap:TreasuryStockMember 2019-07-01 2019-09-30 0001090012 us-gaap:CommonStockMember 2019-07-01 2019-09-30 0001090012 us-gaap:AdditionalPaidInCapitalMember 2019-07-01 2019-09-30 0001090012 us-gaap:CommonStockMember 2019-09-30 0001090012 us-gaap:AdditionalPaidInCapitalMember 2019-09-30 0001090012 us-gaap:RetainedEarningsMember 2019-09-30 0001090012 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-09-30 0001090012 us-gaap:TreasuryStockMember 2019-09-30 0001090012 us-gaap:CommonStockMember 2019-12-31 0001090012 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001090012 us-gaap:RetainedEarningsMember 2019-12-31 0001090012 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001090012 us-gaap:NoncontrollingInterestMember 2019-12-31 0001090012 us-gaap:RetainedEarningsMember 2020-01-01 2020-09-30 0001090012 us-gaap:NoncontrollingInterestMember 2020-01-01 2020-09-30 0001090012 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-09-30 0001090012 us-gaap:CommonStockMember 2020-01-01 2020-09-30 0001090012 us-gaap:TreasuryStockMember 2020-01-01 2020-09-30 0001090012 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-09-30 0001090012 us-gaap:CommonStockMember 2018-12-31 0001090012 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001090012 us-gaap:RetainedEarningsMember 2018-12-31 0001090012 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001090012 us-gaap:TreasuryStockMember 2018-12-31 0001090012 us-gaap:RetainedEarningsMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2018-12-31 0001090012 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2018-12-31 0001090012 us-gaap:RetainedEarningsMember 2019-01-01 2019-09-30 0001090012 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-09-30 0001090012 us-gaap:CommonStockMember 2019-01-01 2019-09-30 0001090012 us-gaap:TreasuryStockMember 2019-01-01 2019-09-30 0001090012 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-09-30 0001090012 dvn:OpenOilDerivativePositionsMember 2020-01-01 2020-09-30 0001090012 dvn:OpenNaturalGasDerivativePositionsMember 2020-01-01 2020-09-30 0001090012 dvn:OpenNGLDerivativePositionsMember 2020-01-01 2020-09-30 0001090012 dvn:OilGasAndNGLSalesMember dvn:OilMember 2020-07-01 2020-09-30 0001090012 dvn:OilGasAndNGLSalesMember dvn:OilMember 2019-07-01 2019-09-30 0001090012 dvn:OilGasAndNGLSalesMember dvn:OilMember 2020-01-01 2020-09-30 0001090012 dvn:OilGasAndNGLSalesMember dvn:OilMember 2019-01-01 2019-09-30 0001090012 dvn:OilGasAndNGLSalesMember dvn:GasMember 2020-07-01 2020-09-30 0001090012 dvn:OilGasAndNGLSalesMember dvn:GasMember 2019-07-01 2019-09-30 0001090012 dvn:OilGasAndNGLSalesMember dvn:GasMember 2020-01-01 2020-09-30 0001090012 dvn:OilGasAndNGLSalesMember dvn:GasMember 2019-01-01 2019-09-30 0001090012 dvn:OilGasAndNGLSalesMember dvn:NGLMember 2020-07-01 2020-09-30 0001090012 dvn:OilGasAndNGLSalesMember dvn:NGLMember 2019-07-01 2019-09-30 0001090012 dvn:OilGasAndNGLSalesMember dvn:NGLMember 2020-01-01 2020-09-30 0001090012 dvn:OilGasAndNGLSalesMember dvn:NGLMember 2019-01-01 2019-09-30 0001090012 dvn:MarketingRevenuesMember dvn:OilMember 2020-07-01 2020-09-30 0001090012 dvn:MarketingRevenuesMember dvn:OilMember 2019-07-01 2019-09-30 0001090012 dvn:MarketingRevenuesMember dvn:OilMember 2020-01-01 2020-09-30 0001090012 dvn:MarketingRevenuesMember dvn:OilMember 2019-01-01 2019-09-30 0001090012 dvn:MarketingRevenuesMember dvn:GasMember 2020-07-01 2020-09-30 0001090012 dvn:MarketingRevenuesMember dvn:GasMember 2019-07-01 2019-09-30 0001090012 dvn:MarketingRevenuesMember dvn:GasMember 2020-01-01 2020-09-30 0001090012 dvn:MarketingRevenuesMember dvn:GasMember 2019-01-01 2019-09-30 0001090012 dvn:MarketingRevenuesMember dvn:NGLMember 2020-07-01 2020-09-30 0001090012 dvn:MarketingRevenuesMember dvn:NGLMember 2019-07-01 2019-09-30 0001090012 dvn:MarketingRevenuesMember dvn:NGLMember 2020-01-01 2020-09-30 0001090012 dvn:MarketingRevenuesMember dvn:NGLMember 2019-01-01 2019-09-30 0001090012 dvn:MarketingRevenuesMember 2020-07-01 2020-09-30 0001090012 dvn:MarketingRevenuesMember 2019-07-01 2019-09-30 0001090012 dvn:MarketingRevenuesMember 2020-01-01 2020-09-30 0001090012 dvn:MarketingRevenuesMember 2019-01-01 2019-09-30 0001090012 dvn:MidstreamRevenuesMember 2020-07-01 2020-09-30 0001090012 dvn:MidstreamRevenuesMember 2019-07-01 2019-09-30 0001090012 dvn:MidstreamRevenuesMember 2020-01-01 2020-09-30 0001090012 dvn:MidstreamRevenuesMember 2019-01-01 2019-09-30 0001090012 dvn:BarnettShaleMember dvn:BanpuKalninVenturesMember 2020-04-30 0001090012 dvn:BarnettShaleMember dvn:BanpuKalninVenturesMember us-gaap:SubsequentEventMember 2020-10-01 2020-10-01 iso4217:USD utr:MMBTU iso4217:USD utr:bbl 0001090012 dvn:BarnettShaleMember dvn:BanpuKalninVenturesMember srt:ScenarioForecastMember 2021-01-01 2024-12-31 0001090012 dvn:BarnettShaleMember dvn:BanpuKalninVenturesMember 2019-10-01 2019-12-31 0001090012 dvn:BarnettShaleMember dvn:BanpuKalninVenturesMember 2020-01-01 2020-03-31 0001090012 dvn:BarnettShaleMember dvn:BanpuKalninVenturesMember 2020-07-01 2020-09-30 0001090012 dvn:CanadianNaturalResourcesLimitedMember dvn:CanadianBusinessSegmentMember 2020-04-01 2020-06-30 iso4217:CAD 0001090012 dvn:CanadianNaturalResourcesLimitedMember dvn:CanadianBusinessSegmentMember 2019-01-01 2019-12-31 0001090012 dvn:NonCoreAssetsMember 2019-01-01 2019-03-31 utr:MMBoe 0001090012 dvn:DevonAndWPXAgreementMember 2020-01-01 2020-09-30 utr:bbl 0001090012 dvn:NYMEXWestTexasIntermediatePriceSwapsOilQ42020Member 2020-01-01 2020-09-30 0001090012 dvn:NYMEXWestTexasIntermediatePriceSwapsOilQ1Q42021Member 2020-01-01 2020-09-30 0001090012 dvn:NYMEXWestTexasIntermediatePriceSwapsOilQ12022Member 2020-01-01 2020-09-30 0001090012 dvn:NYMEXWestTexasIntermediatePriceSwapsOilQ42020Member 2020-09-30 0001090012 dvn:NYMEXWestTexasIntermediatePriceSwapsOilQ1Q42021Member 2020-09-30 0001090012 dvn:NYMEXWestTexasIntermediatePriceSwapsOilQ12022Member 2020-09-30 0001090012 dvn:NYMEXWestTexasIntermediatePriceCollarsOilQ42020Member 2020-01-01 2020-09-30 0001090012 dvn:NYMEXWestTexasIntermediatePriceCollarsOilQ1Q42021Member 2020-01-01 2020-09-30 0001090012 dvn:NYMEXWestTexasIntermediatePriceCollarsOilQ12022Member 2020-01-01 2020-09-30 0001090012 dvn:NYMEXWestTexasIntermediatePriceCollarsOilQ42020Member 2020-09-30 0001090012 dvn:NYMEXWestTexasIntermediatePriceCollarsOilQ1Q42021Member 2020-09-30 0001090012 dvn:NYMEXWestTexasIntermediatePriceCollarsOilQ12022Member 2020-09-30 0001090012 dvn:ArgusMEHBasisSwapsOilQ42020Member 2020-01-01 2020-09-30 0001090012 dvn:MidlandSweetBasisSwapsOilQ42020Member 2020-01-01 2020-09-30 0001090012 dvn:NYMEXRollBasisSwapsOilQ42020Member 2020-01-01 2020-09-30 0001090012 dvn:MidlandSweetBasisSwapsOilQ1Q42021Member 2020-01-01 2020-09-30 utr:MMBTU 0001090012 dvn:FERCHenryHubPriceSwapsNaturalGasQ42020Member 2020-01-01 2020-09-30 0001090012 dvn:FERCHenryHubPriceSwapNaturalGasQ1Q42021Member 2020-01-01 2020-09-30 0001090012 dvn:FERCHenryHubPriceSwapsNaturalGasQ12022Member 2020-01-01 2020-09-30 0001090012 dvn:FERCHenryHubPriceSwapsNaturalGasQ42020Member 2020-09-30 0001090012 dvn:FERCHenryHubPriceSwapNaturalGasQ1Q42021Member 2020-09-30 0001090012 dvn:FERCHenryHubPriceSwapsNaturalGasQ12022Member 2020-09-30 0001090012 dvn:FERCHenryHubPriceCollarsNaturalGasQ42020Member 2020-01-01 2020-09-30 0001090012 dvn:FERCHenryHubPriceCollarsNaturalGasQ1Q42021Member 2020-01-01 2020-09-30 0001090012 dvn:FERCHenryHubPriceCollarsNaturalGasQ12022Member 2020-01-01 2020-09-30 0001090012 dvn:FERCHenryHubPriceCollarsNaturalGasQ42020Member 2020-09-30 0001090012 dvn:FERCHenryHubPriceCollarsNaturalGasQ1Q42021Member 2020-09-30 0001090012 dvn:FERCHenryHubPriceCollarsNaturalGasQ12022Member 2020-09-30 0001090012 dvn:PEPLBasisSwapsNaturalGasQ42020Member 2020-01-01 2020-09-30 0001090012 dvn:ElPasoNaturalGasBasisSwapsQ42020Member 2020-01-01 2020-09-30 0001090012 dvn:HoustonShipChannelNaturalGasBasisSwapsQ42020Member 2020-01-01 2020-09-30 0001090012 dvn:ElPasoNaturalGasBasisSwapsQ1Q42021Member 2020-01-01 2020-09-30 0001090012 dvn:OPISMontBelvieuTexasNaturalGasolinePriceSwapsNGLQ42020Member 2020-01-01 2020-09-30 0001090012 dvn:OPISMontBelvieuTexasNormalButanePriceSwapsNGLQ42020Member 2020-01-01 2020-09-30 0001090012 dvn:OPISMontBelvieuTexasPropanePriceSwapsNGLQ42020Member 2020-01-01 2020-09-30 0001090012 dvn:OPISMontBelvieuTexasNaturalGasolinePriceSwapsNGLQ42020Member 2020-09-30 0001090012 dvn:OPISMontBelvieuTexasNormalButanePriceSwapsNGLQ42020Member 2020-09-30 0001090012 dvn:OPISMontBelvieuTexasPropanePriceSwapsNGLQ42020Member 2020-09-30 0001090012 us-gaap:CommodityContractMember us-gaap:OtherCurrentAssetsMember 2020-09-30 0001090012 us-gaap:CommodityContractMember us-gaap:OtherCurrentAssetsMember 2019-12-31 0001090012 us-gaap:CommodityContractMember us-gaap:OtherNoncurrentAssetsMember 2020-09-30 0001090012 us-gaap:CommodityContractMember us-gaap:OtherNoncurrentAssetsMember 2019-12-31 0001090012 us-gaap:CommodityContractMember us-gaap:OtherCurrentLiabilitiesMember 2020-09-30 0001090012 us-gaap:CommodityContractMember us-gaap:OtherCurrentLiabilitiesMember 2019-12-31 0001090012 us-gaap:CommodityContractMember us-gaap:OtherNoncurrentLiabilitiesMember 2020-09-30 0001090012 us-gaap:CommodityContractMember us-gaap:OtherNoncurrentLiabilitiesMember 2019-12-31 0001090012 us-gaap:GeneralAndAdministrativeExpenseMember 2020-01-01 2020-09-30 0001090012 us-gaap:GeneralAndAdministrativeExpenseMember 2019-01-01 2019-09-30 0001090012 dvn:ExplorationExpensesMember 2020-01-01 2020-09-30 0001090012 dvn:ExplorationExpensesMember 2019-01-01 2019-09-30 0001090012 us-gaap:RestructuringChargesMember 2020-01-01 2020-09-30 0001090012 us-gaap:RestructuringChargesMember 2019-01-01 2019-09-30 0001090012 us-gaap:RestrictedStockUnitsRSUMember 2019-12-31 0001090012 us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-09-30 0001090012 us-gaap:RestrictedStockUnitsRSUMember 2020-09-30 0001090012 dvn:PerformanceBasedRestrictedStockAwardsMember 2019-12-31 0001090012 dvn:PerformanceBasedRestrictedStockAwardsMember 2020-01-01 2020-09-30 0001090012 dvn:PerformanceBasedRestrictedStockAwardsMember 2020-09-30 0001090012 us-gaap:PerformanceSharesMember 2019-12-31 0001090012 us-gaap:PerformanceSharesMember 2020-01-01 2020-09-30 0001090012 us-gaap:PerformanceSharesMember 2020-09-30 0001090012 srt:MaximumMember us-gaap:PerformanceSharesMember 2020-01-01 2020-09-30 xbrli:pure 0001090012 dvn:ProvedOilAndGasAssetsMember 2020-01-01 2020-09-30 0001090012 us-gaap:OtherAssetsMember 2020-01-01 2020-09-30 0001090012 dvn:UnprovedOilAndGasAssetsMember 2020-07-01 2020-09-30 0001090012 dvn:UnprovedOilAndGasAssetsMember 2019-07-01 2019-09-30 0001090012 dvn:UnprovedOilAndGasAssetsMember 2020-01-01 2020-09-30 0001090012 dvn:UnprovedOilAndGasAssetsMember 2019-01-01 2019-09-30 0001090012 dvn:ProvedAssetImpairmentsMember 2020-01-01 2020-03-31 0001090012 dvn:ProductLineFillImpairmentsMember 2020-01-01 2020-03-31 0001090012 dvn:RockiesFieldMember 2020-01-01 2020-09-30 0001090012 dvn:CostReductionPlanMember 2020-07-01 2020-09-30 0001090012 dvn:ReductionOfWorkforceMember 2019-01-01 2019-09-30 0001090012 dvn:ReductionOfWorkforceMember dvn:PensionAndPostretirementDefinedBenefitSettlementsMember 2019-01-01 2019-09-30 0001090012 us-gaap:OtherCurrentLiabilitiesMember 2019-12-31 0001090012 us-gaap:OtherNoncurrentLiabilitiesMember 2019-12-31 0001090012 us-gaap:OtherCurrentLiabilitiesMember dvn:ReductionOfWorkforceMember 2020-01-01 2020-09-30 0001090012 dvn:ReductionOfWorkforceMember 2020-01-01 2020-09-30 0001090012 us-gaap:OtherCurrentLiabilitiesMember dvn:PriorYearsRestructuringsMember 2020-01-01 2020-09-30 0001090012 dvn:PriorYearsRestructuringsMember 2020-01-01 2020-09-30 0001090012 us-gaap:OtherCurrentLiabilitiesMember 2020-09-30 0001090012 us-gaap:OtherNoncurrentLiabilitiesMember 2020-09-30 0001090012 us-gaap:OtherCurrentLiabilitiesMember 2018-12-31 0001090012 us-gaap:OtherNoncurrentLiabilitiesMember 2018-12-31 0001090012 us-gaap:OtherCurrentLiabilitiesMember dvn:PriorYearsRestructuringsMember 2019-01-01 2019-09-30 0001090012 us-gaap:OtherNoncurrentLiabilitiesMember dvn:PriorYearsRestructuringsMember 2019-01-01 2019-09-30 0001090012 dvn:PriorYearsRestructuringsMember 2019-01-01 2019-09-30 0001090012 us-gaap:OtherCurrentLiabilitiesMember 2019-09-30 0001090012 us-gaap:OtherNoncurrentLiabilitiesMember 2019-09-30 0001090012 dvn:CoronavirusAidReliefAndEconomicSecurityActMember 2020-01-01 2020-09-30 0001090012 dvn:CoronavirusAidReliefAndEconomicSecurityActMember 2020-07-27 2020-07-28 0001090012 dvn:OilGasAndNGLSalesMember 2020-09-30 0001090012 dvn:OilGasAndNGLSalesMember 2019-12-31 0001090012 dvn:MarketingAndMidstreamRevenuesMember 2020-09-30 0001090012 dvn:MarketingAndMidstreamRevenuesMember 2019-12-31 0001090012 dvn:ProvedAssetImpairmentsMember 2020-01-01 2020-09-30 0001090012 dvn:FivePointEightFivePercentDueDecemberFifteenthTwoThousandTwentyFiveMember 2020-09-30 0001090012 dvn:FivePointEightFivePercentDueDecemberFifteenthTwoThousandTwentyFiveMember 2019-12-31 0001090012 dvn:SevenPointFiveZeroPercentDueSeptemberFifteenthTwoThousandAndTwentySevenMember 2020-09-30 0001090012 dvn:SevenPointFiveZeroPercentDueSeptemberFifteenthTwoThousandAndTwentySevenMember 2019-12-31 0001090012 dvn:SevenPointEightSevenFivePercentDueSeptemberThirtiethTwoThousandAndThirtyOneMember 2020-09-30 0001090012 dvn:SevenPointEightSevenFivePercentDueSeptemberThirtiethTwoThousandAndThirtyOneMember 2019-12-31 0001090012 dvn:SevenPointNineFivePercentDueAprilFifteenthTwoThousandAndThirtyTwoMember 2020-09-30 0001090012 dvn:SevenPointNineFivePercentDueAprilFifteenthTwoThousandAndThirtyTwoMember 2019-12-31 0001090012 dvn:FivePointSixZeroPercentDueJulyFifteenthTwoThousandAndFortyOneMember 2020-09-30 0001090012 dvn:FivePointSixZeroPercentDueJulyFifteenthTwoThousandAndFortyOneMember 2019-12-31 0001090012 dvn:FourPointSevenFivePercentDueMayFifteenthTwoThousandFortyTwoMember 2020-09-30 0001090012 dvn:FourPointSevenFivePercentDueMayFifteenthTwoThousandFortyTwoMember 2019-12-31 0001090012 dvn:FivePointZeroZeroPercentDueJuneFifteenTwoThousandAndFortyFiveMember 2020-09-30 0001090012 dvn:FivePointZeroZeroPercentDueJuneFifteenTwoThousandAndFortyFiveMember 2019-12-31 0001090012 dvn:FivePointEightFivePercentDueDecemberFifteenthTwoThousandTwentyFiveMember 2020-01-01 2020-09-30 0001090012 dvn:SevenPointFiveZeroPercentDueSeptemberFifteenthTwoThousandAndTwentySevenMember 2020-01-01 2020-09-30 0001090012 dvn:SevenPointEightSevenFivePercentDueSeptemberThirtiethTwoThousandAndThirtyOneMember 2020-01-01 2020-09-30 0001090012 dvn:SevenPointNineFivePercentDueAprilFifteenthTwoThousandAndThirtyTwoMember 2020-01-01 2020-09-30 0001090012 dvn:FivePointSixZeroPercentDueJulyFifteenthTwoThousandAndFortyOneMember 2020-01-01 2020-09-30 0001090012 dvn:FourPointSevenFivePercentDueMayFifteenthTwoThousandFortyTwoMember 2020-01-01 2020-09-30 0001090012 dvn:FivePointZeroZeroPercentDueJuneFifteenTwoThousandAndFortyFiveMember 2020-01-01 2020-09-30 0001090012 us-gaap:LineOfCreditMember 2020-09-30 0001090012 us-gaap:LineOfCreditMember srt:MaximumMember 2020-09-30 0001090012 dvn:SixPointThreeZeroPercentDueJanuaryFifteenthTwoThousandAndNineteenMember us-gaap:SeniorNotesMember 2019-01-01 2019-01-31 0001090012 dvn:SixPointThreeZeroPercentDueJanuaryFifteenthTwoThousandAndNineteenMember us-gaap:SeniorNotesMember 2019-01-31 0001090012 dvn:AssetDivestituresMember 2019-01-01 2019-09-30 0001090012 dvn:ShareRepurchaseProgramsMember 2018-03-31 0001090012 dvn:ShareRepurchaseProgramsMember 2018-06-30 0001090012 dvn:ShareRepurchaseProgramsMember 2019-02-28 0001090012 dvn:FiveBillionDollarShareRepurchaseProgramMember 2020-01-01 2020-09-30 0001090012 dvn:OneBillionDollarShareRepurchaseProgramMember 2019-12-31 0001090012 dvn:OneBillionDollarShareRepurchaseProgramMember 2020-01-01 2020-09-30 0001090012 srt:MinimumMember 2020-09-30 0001090012 dvn:OneBillionDollarShareRepurchaseProgramMember srt:MaximumMember 2020-12-31 0001090012 dvn:FiveBillionDollarShareRepurchaseProgramMember 2018-01-01 2018-12-31 0001090012 dvn:FiveBillionDollarShareRepurchaseProgramMember 2019-01-01 2019-03-31 0001090012 dvn:FiveBillionDollarShareRepurchaseProgramMember 2019-04-01 2019-06-30 0001090012 dvn:FiveBillionDollarShareRepurchaseProgramMember 2019-07-01 2019-09-30 0001090012 dvn:FiveBillionDollarShareRepurchaseProgramMember 2019-10-01 2019-12-31 0001090012 dvn:FiveBillionDollarShareRepurchaseProgramMember 2018-01-01 2019-12-31 0001090012 dvn:OneBillionDollarShareRepurchaseProgramMember 2020-01-01 2020-03-31 0001090012 2020-01-01 2020-03-31 0001090012 2020-04-01 2020-06-30 0001090012 2019-01-01 2019-03-31 0001090012 2019-04-01 2019-06-30 0001090012 2020-08-04 2020-08-04 0001090012 2020-08-04 0001090012 us-gaap:SubsequentEventMember 2020-10-01 0001090012 srt:ScenarioForecastMember srt:MaximumMember dvn:BanpuKalninVenturesMember dvn:BarnettShaleMember 2021-01-01 2024-12-31 0001090012 dvn:BanpuKalninVenturesMember dvn:BarnettShaleMember 2020-01-01 2020-09-30 0001090012 dvn:BarnettShaleMember 2019-10-01 2019-12-31 0001090012 dvn:BarnettShaleMember 2020-01-01 2020-03-31 0001090012 dvn:BarnettShaleMember 2020-07-01 2020-09-30 0001090012 dvn:BarnettShaleMember 2020-09-30 0001090012 dvn:BarnettShaleMember 2020-09-01 2020-09-30 0001090012 dvn:BarnettShaleMember 2020-01-01 2020-09-30 dvn:Property 0001090012 dvn:CanadianNaturalResourcesLimitedMember dvn:CanadianBusinessSegmentMember 2020-01-01 2020-06-30 0001090012 dvn:FourPointZeroZeroPercentDueJulyFifteenthTwoThousandAndTwentyOneMember dvn:CanadianBusinessSegmentMember us-gaap:SeniorNotesMember 2019-07-01 2019-09-30 0001090012 dvn:FourPointZeroZeroPercentDueJulyFifteenthTwoThousandAndTwentyOneMember dvn:CanadianBusinessSegmentMember us-gaap:SeniorNotesMember 2019-09-30 0001090012 dvn:ThreePointTwoFivePercentDueMayFifteenthTwoThousandTwentyTwoMember dvn:CanadianBusinessSegmentMember us-gaap:SeniorNotesMember 2019-07-01 2019-09-30 0001090012 dvn:ThreePointTwoFivePercentDueMayFifteenthTwoThousandTwentyTwoMember dvn:CanadianBusinessSegmentMember us-gaap:SeniorNotesMember 2019-09-30 0001090012 dvn:CanadianBusinessSegmentMember 2019-07-01 2019-09-30 0001090012 dvn:CanadianNaturalResourcesLimitedMember dvn:CanadianBusinessSegmentMember 2020-09-30 0001090012 dvn:CanadianDivestitureMember 2020-01-01 2020-09-30 0001090012 dvn:BarnettShaleDiscontinuedOperationsMember 2020-07-01 2020-09-30 0001090012 dvn:BarnettShaleDiscontinuedOperationsMember 2020-01-01 2020-09-30 0001090012 dvn:CanadaDiscontinuedOperationsMember 2020-01-01 2020-09-30 0001090012 dvn:CanadaDiscontinuedOperationsMember 2020-07-01 2020-09-30 0001090012 dvn:BarnettShaleDiscontinuedOperationsMember 2019-07-01 2019-09-30 0001090012 dvn:CanadaDiscontinuedOperationsMember 2019-07-01 2019-09-30 0001090012 dvn:BarnettShaleDiscontinuedOperationsMember 2019-01-01 2019-09-30 0001090012 dvn:CanadaDiscontinuedOperationsMember 2019-01-01 2019-09-30 0001090012 dvn:BarnettShaleDiscontinuedOperationsMember 2020-09-30 0001090012 dvn:CanadaDiscontinuedOperationsMember 2020-09-30 0001090012 dvn:BarnettShaleDiscontinuedOperationsMember 2019-12-31 0001090012 dvn:CanadaDiscontinuedOperationsMember 2019-12-31 0001090012 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2020-09-30 0001090012 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2020-09-30 0001090012 us-gaap:FairValueInputsLevel1Member 2020-09-30 0001090012 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:CommodityContractMember 2020-09-30 0001090012 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:CommodityContractMember 2020-09-30 0001090012 us-gaap:CommodityContractMember us-gaap:FairValueInputsLevel2Member 2020-09-30 0001090012 us-gaap:FairValueInputsLevel2Member 2020-09-30 0001090012 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-12-31 0001090012 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-12-31 0001090012 us-gaap:FairValueInputsLevel1Member 2019-12-31 0001090012 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:CommodityContractMember 2019-12-31 0001090012 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:CommodityContractMember 2019-12-31 0001090012 us-gaap:CommodityContractMember us-gaap:FairValueInputsLevel2Member 2019-12-31 0001090012 us-gaap:FairValueInputsLevel2Member 2019-12-31

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2020

or

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

Commission File Number 001-32318

DEVON ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

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)

Registrant’s telephone number, including area code: (405) 235-3611

Former name, address and former fiscal year, if changed from last report: Not applicable

Securities registered pursuant to Section 12(b) of the Act:

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

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.

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

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 October 21, 2020, 382.5 million shares of common stock were outstanding.

Table of Contents

DEVON ENERGY CORPORATION

FORM 10-Q

TABLE OF CONTENTS

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 | 12
|  | Note 4 – Share-Based Compensation | 14
|  | Note 5 – Asset Impairments | 15
|  | Note 6 – Restructuring and Transaction Costs | 15
|  | Note 7 – Income Taxes | 16
|  | Note 8 – Net Earnings (Loss) Per Share From Continuing Operations | 17
|  | Note 9 – Other Comprehensive Earnings (Loss) | 17
|  | Note 10 – Supplemental Information to Statements of Cash Flows | 18
|  | Note 11 – Accounts Receivable | 18
|  | Note 12 – Property, Plant and Equipment | 19
|  | Note 13 – Debt and Related Expenses | 19
|  | Note 14 – Leases | 20
|  | Note 15 – Asset Retirement Obligations | 20
|  | Note 16 – Stockholders’ Equity | 20
|  | Note 17 – Discontinued Operations and Assets Held For Sale | 21
|  | Note 18 – Commitments and Contingencies | 24
|  | Note 19 – Fair Value Measurements | 25
Item 2. |  | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26
Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk | 46
Item 4. |  | Controls and Procedures | 46
Part II. Other Information |
Item 1. |  | Legal Proceedings | 47
Item 1A. |  | Risk Factors | 47
Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds | 48
Item 3. |  | Defaults Upon Senior Securities | 48
Item 4. |  | Mine Safety Disclosures | 48
Item 5. |  | Other Information | 48
Item 6. |  | Exhibits | 49
Signatures |  |  | 50

2

Table of Contents

DEFINITIONS

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:

“ASU” means Accounting Standards Update.

“Bbl” or “Bbls” means barrel or barrels.

“BKV” means Banpu Kalnin Ventures.

“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.

“Btu” means British thermal units, a measure of heating value.

“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.

“DD&A” means depreciation, depletion and amortization expenses.

“Devon Plan” means Devon Energy Corporation Incentive Savings Plan.

“FASB” means Financial Accounting Standards Board.

“G&A” means general and administrative expenses.

“GAAP” means U.S. generally accepted accounting principles.

“Inside FERC” refers to the publication Inside FERC’s Gas Market Report.

“LOE” means lease operating expenses.

“MBbls” means thousand barrels.

“MBoe” means thousand Boe.

“Mcf” means thousand cubic feet.

“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.

“MMBoe” means million Boe.

“MMBtu” means million Btu.

“MMcf” means million cubic feet.

3

Table of Contents

“N/M” means not meaningful.

“NGL” or “NGLs” means natural gas liquids.

“NYMEX” means New York Mercantile Exchange.

“OPEC” means Organization of the Petroleum Exporting Countries.

“OPIS” means Oil Price Information Service.

“SEC” means United States Securities and Exchange Commission.

“Senior Credit Facility” means Devon’s syndicated unsecured revolving line of credit, effective as of October 5, 2018.

“TSR” means total shareholder return.

“U.S.” means United States of America.

“VIE” means variable interest entity.

“WPX” means WPX Energy, Inc.

“WTI” means West Texas Intermediate.

“/Bbl” means per barrel.

“/d” means per day.

“/MMBtu” means per MMBtu.

4

Table of Contents

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

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 from our expectations due to a number of factors, including, but not limited to those, identified below.

The COVID-19 pandemic and its related repercussions have created significant volatility, uncertainty and turmoil in the global economy and our industry. This turmoil has included an unprecedented supply-and-demand imbalance for oil and other commodities, resulting in a swift and material decline in commodity prices in early 2020. Our future actual results could differ materially from the forward-looking statements in this report due to the COVID-19 pandemic and related impacts, including, among other things: contributing to a sustained or further deterioration in commodity prices; causing takeaway capacity constraints for production, resulting in production shut-ins and additional downward pressure on impacted regional pricing differentials; limiting our ability to access sources of capital due to disruptions in financial markets; increasing the risk of a downgrade from credit rating agencies; exacerbating counterparty credit risks and the risk of supply chain interruptions; and increasing the risk of operational disruptions due to social distancing measures and other changes to business practices.

In addition to the risks associated with the COVID-19 pandemic and its related impacts, our actual future results could differ materially from our expectations due to other factors, including, among other things:

| • | the volatility of oil, gas and NGL prices;

| • | uncertainties inherent in estimating oil, gas and NGL reserves;

| • | the extent to which we are successful in acquiring and discovering additional reserves;

| • | the uncertainties, costs and risks involved in our operations, including as a result of employee misconduct;

| • | regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to environmental matters;

| • | risks related to regulatory, social and market efforts to address climate change;

| • | risks related to our hedging activities;

| • | counterparty credit risks;

| • | risks relating to our indebtedness;

| • | cyberattack risks;

| • | our limited control over third parties who operate some of our oil and gas properties;

| • | midstream capacity constraints and potential interruptions in production;

| • | the extent to which insurance covers any losses we may experience;

| • | competition for assets, materials, people and capital;

| • | risks related to investors attempting to effect change;

| • | our ability to successfully complete mergers, acquisitions and divestitures;

| • | risks related to the Merger, including restrictions on our operations during the pendency of the Merger, litigation risk, the risk that the Merger Agreement may be terminated and the risk that we may not realize the anticipated benefits of the Merger or successfully integrate the two companies; and

| • | any of the other risks and uncertainties discussed in this report, our 2019 Annual Report on Form 10-K and our other filings with the SEC.

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.

5

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
| (Unaudited) |
Oil, gas and NGL sales |  | $ | 678 |  |  | $ | 919 |  |  | $ | 1,909 |  |  | $ | 2,774 |
Oil, gas and NGL derivatives |  |  | (87 | ) |  |  | 127 |  |  |  | 272 |  |  |  | (338 | )
Marketing and midstream revenues |  |  | 476 |  |  |  | 700 |  |  |  | 1,367 |  |  |  | 2,195 |
Total revenues |  |  | 1,067 |  |  |  | 1,746 |  |  |  | 3,548 |  |  |  | 4,631 |
Production expenses |  |  | 271 |  |  |  | 294 |  |  |  | 852 |  |  |  | 873 |
Exploration expenses |  |  | 39 |  |  |  | 18 |  |  |  | 163 |  |  |  | 29 |
Marketing and midstream expenses |  |  | 478 |  |  |  | 684 |  |  |  | 1,395 |  |  |  | 2,147 |
Depreciation, depletion and amortization |  |  | 299 |  |  |  | 381 |  |  |  | 999 |  |  |  | 1,115 |
Asset impairments |  |  | — |  |  |  | — |  |  |  | 2,666 |  |  |  | — |
Asset dispositions |  |  | — |  |  |  | (1 | ) |  |  | — |  |  |  | (48 | )
General and administrative expenses |  |  | 75 |  |  |  | 107 |  |  |  | 256 |  |  |  | 356 |
Financing costs, net |  |  | 66 |  |  |  | 60 |  |  |  | 200 |  |  |  | 186 |
Restructuring and transaction costs |  |  | 32 |  |  |  | 10 |  |  |  | 32 |  |  |  | 73 |
Other expenses |  |  | — |  |  |  | 3 |  |  |  | (35 | ) |  |  | (12 | )
Total expenses |  |  | 1,260 |  |  |  | 1,556 |  |  |  | 6,528 |  |  |  | 4,719 |
Earnings (loss) from continuing operations before income taxes |  |  | (193 | ) |  |  | 190 |  |  |  | (2,980 | ) |  |  | (88 | )
Income tax expense (benefit) |  |  | (90 | ) |  |  | 54 |  |  |  | (510 | ) |  |  | 3 |
Net earnings (loss) from continuing operations |  |  | (103 | ) |  |  | 136 |  |  |  | (2,470 | ) |  |  | (91 | )
Net earnings (loss) from discontinued operations, net of income taxes |  |  | 13 |  |  |  | (27 | ) |  |  | (103 | ) |  |  | 378 |
Net earnings (loss) |  |  | (90 | ) |  |  | 109 |  |  |  | (2,573 | ) |  |  | 287 |
Net earnings attributable to noncontrolling interests |  |  | 2 |  |  |  | — |  |  |  | 5 |  |  |  | — |
Net earnings (loss) attributable to Devon |  | $ | (92 | ) |  | $ | 109 |  |  | $ | (2,578 | ) |  | $ | 287 |
Basic net earnings (loss) per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic earnings (loss) from continuing operations per share |  | $ | (0.29 | ) |  | $ | 0.34 |  |  | $ | (6.58 | ) |  | $ | (0.22 | )
Basic earnings (loss) from discontinued operations per share |  |  | 0.04 |  |  |  | (0.07 | ) |  |  | (0.27 | ) |  |  | 0.91 |
Basic net earnings (loss) per share |  | $ | (0.25 | ) |  | $ | 0.27 |  |  | $ | (6.85 | ) |  | $ | 0.69 |
Diluted net earnings (loss) per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Diluted earnings (loss) from continuing operations per share |  | $ | (0.29 | ) |  | $ | 0.34 |  |  | $ | (6.58 | ) |  | $ | (0.22 | )
Diluted earnings (loss) from discontinued operations per share |  |  | 0.04 |  |  |  | (0.07 | ) |  |  | (0.27 | ) |  |  | 0.91 |
Diluted net earnings (loss) per share |  | $ | (0.25 | ) |  | $ | 0.27 |  |  | $ | (6.85 | ) |  | $ | 0.69 |
Comprehensive earnings (loss): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net earnings (loss) |  | $ | (90 | ) |  | $ | 109 |  |  | $ | (2,573 | ) |  | $ | 287 |
Other comprehensive earnings (loss), net of tax: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency translation, discontinued operations |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 78 |
Release of Canadian cumulative translation adjustment, discontinued operations |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,237 | )
Pension and postretirement plans |  |  | 1 |  |  |  | 1 |  |  |  | 3 |  |  |  | 16 |
Other comprehensive earnings (loss), net of tax |  |  | 1 |  |  |  | 1 |  |  |  | 3 |  |  |  | (1,143 | )
Comprehensive earnings (loss): |  |  | (89 | ) |  |  | 110 |  |  |  | (2,570 | ) |  |  | (856 | )
Comprehensive earnings attributable to noncontrolling interests |  |  | 2 |  |  |  | — |  |  |  | 5 |  |  |  | — |
Comprehensive earnings (loss) attributable to Devon |  | $ | (91 | ) |  | $ | 110 |  |  | $ | (2,575 | ) |  | $ | (856 | )

See accompanying notes to consolidated financial statements

6

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
|  | (Unaudited) |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net earnings (loss) |  | $ | (90 | ) |  | $ | 109 |  |  | $ | (2,573 | ) |  | $ | 287 |
Adjustments to reconcile net earnings (loss) to net cash from operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net (earnings) loss from discontinued operations, net of income taxes |  |  | (13 | ) |  |  | 27 |  |  |  | 103 |  |  |  | (378 | )
Depreciation, depletion and amortization |  |  | 299 |  |  |  | 381 |  |  |  | 999 |  |  |  | 1,115 |
Asset impairments |  |  | — |  |  |  | — |  |  |  | 2,666 |  |  |  | — |
Leasehold impairments |  |  | 36 |  |  |  | 13 |  |  |  | 149 |  |  |  | 15 |
Accretion on discounted liabilities |  |  | 8 |  |  |  | 8 |  |  |  | 24 |  |  |  | 25 |
Total (gains) losses on commodity derivatives |  |  | 87 |  |  |  | (127 | ) |  |  | (272 | ) |  |  | 338 |
Cash settlements on commodity derivatives |  |  | 10 |  |  |  | 71 |  |  |  | 343 |  |  |  | 125 |
Gains on asset dispositions |  |  | — |  |  |  | (1 | ) |  |  | — |  |  |  | (48 | )
Deferred income tax expense (benefit) |  |  | — |  |  |  | 52 |  |  |  | (311 | ) |  |  | 2 |
Share-based compensation |  |  | 31 |  |  |  | 23 |  |  |  | 70 |  |  |  | 92 |
Other |  |  | 1 |  |  |  | 3 |  |  |  | 5 |  |  |  | (9 | )
Changes in assets and liabilities, net |  |  | 58 |  |  |  | 36 |  |  |  | (97 | ) |  |  | (100 | )
Net cash from operating activities - continuing operations |  |  | 427 |  |  |  | 595 |  |  |  | 1,106 |  |  |  | 1,464 |
Cash flows from investing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Capital expenditures |  |  | (204 | ) |  |  | (526 | ) |  |  | (936 | ) |  |  | (1,502 | )
Acquisitions of property and equipment |  |  | — |  |  |  | (5 | ) |  |  | (5 | ) |  |  | (28 | )
Divestitures of property and equipment |  |  | 1 |  |  |  | 9 |  |  |  | 29 |  |  |  | 347 |
Net cash from investing activities - continuing operations |  |  | (203 | ) |  |  | (522 | ) |  |  | (912 | ) |  |  | (1,183 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Repayments of long-term debt |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (162 | )
Repurchases of common stock |  |  | — |  |  |  | (561 | ) |  |  | (38 | ) |  |  | (1,746 | )
Dividends paid on common stock |  |  | (43 | ) |  |  | (35 | ) |  |  | (119 | ) |  |  | (106 | )
Contributions from noncontrolling interests |  |  | 1 |  |  |  | — |  |  |  | 12 |  |  |  | — |
Distributions to noncontrolling interests |  |  | (4 | ) |  |  | — |  |  |  | (10 | ) |  |  | — |
Shares exchanged for tax withholdings and other |  |  | — |  |  |  | (1 | ) |  |  | (17 | ) |  |  | (23 | )
Net cash from financing activities - continuing operations |  |  | (46 | ) |  |  | (597 | ) |  |  | (172 | ) |  |  | (2,037 | )
Net change in cash, cash equivalents and restricted cash of continuing operations |  |  | 178 |  |  |  | (524 | ) |  |  | 22 |  |  |  | (1,756 | )
Cash flows from discontinued operations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating activities |  |  | 45 |  |  |  | (94 | ) |  |  | (129 | ) |  |  | 37 |
Investing activities |  |  | 1 |  |  |  | (5 | ) |  |  | 171 |  |  |  | 2,472 |
Financing activities |  |  | — |  |  |  | (1,571 | ) |  |  | — |  |  |  | (1,579 | )
Effect of exchange rate changes on cash |  |  | 4 |  |  |  | (3 | ) |  |  | (11 | ) |  |  | 36 |
Net change in cash, cash equivalents and restricted cash of discontinued operations |  |  | 50 |  |  |  | (1,673 | ) |  |  | 31 |  |  |  | 966 |
Net change in cash, cash equivalents and restricted cash |  |  | 228 |  |  |  | (2,197 | ) |  |  | 53 |  |  |  | (790 | )
Cash, cash equivalents and restricted cash at beginning of period |  |  | 1,669 |  |  |  | 3,853 |  |  |  | 1,844 |  |  |  | 2,446 |
Cash, cash equivalents and restricted cash at end of period |  | $ | 1,897 |  |  | $ | 1,656 |  |  | $ | 1,897 |  |  | $ | 1,656 |
Reconciliation of cash, cash equivalents and restricted cash: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 1,707 |  |  | $ | 1,375 |  |  | $ | 1,707 |  |  | $ | 1,375 |
Cash restricted for discontinued operations |  |  | 190 |  |  |  | 280 |  |  |  | 190 |  |  |  | 280 |
Restricted cash included in other current assets |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | 1 |
Total cash, cash equivalents and restricted cash |  | $ | 1,897 |  |  | $ | 1,656 |  |  | $ | 1,897 |  |  | $ | 1,656 |

See accompanying notes to consolidated financial statements

7

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

|  | September 30, 2020 |  |  | December 31, 2019 |
|  | (Unaudited) |  |  |  |  |
ASSETS |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 1,707 |  |  | $ | 1,464 |
Cash restricted for discontinued operations |  |  | 190 |  |  |  | 380 |
Accounts receivable |  |  | 493 |  |  |  | 832 |
Current assets associated with discontinued operations |  |  | 728 |  |  |  | 896 |
Other current assets |  |  | 359 |  |  |  | 279 |
Total current assets |  |  | 3,477 |  |  |  | 3,851 |
Oil and gas property and equipment, based on successful efforts accounting, net |  |  | 4,553 |  |  |  | 7,558 |
Other property and equipment, net ($100 million and $80 million related to CDM in 2020 and 2019, respectively) |  |  | 1,003 |  |  |  | 1,035 |
Total property and equipment, net |  |  | 5,556 |  |  |  | 8,593 |
Goodwill |  |  | 753 |  |  |  | 753 |
Right-of-use assets |  |  | 226 |  |  |  | 243 |
Other long-term assets |  |  | 233 |  |  |  | 196 |
Long-term assets associated with discontinued operations |  |  | 81 |  |  |  | 81 |
Total assets |  | $ | 10,326 |  |  | $ | 13,717 |
LIABILITIES AND EQUITY |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |
Accounts payable |  | $ | 415 |  |  | $ | 428 |
Revenues and royalties payable |  |  | 562 |  |  |  | 730 |
Current liabilities associated with discontinued operations |  |  | 463 |  |  |  | 459 |
Other current liabilities |  |  | 269 |  |  |  | 310 |
Total current liabilities |  |  | 1,709 |  |  |  | 1,927 |
Long-term debt |  |  | 4,297 |  |  |  | 4,294 |
Lease liabilities |  |  | 245 |  |  |  | 244 |
Asset retirement obligations |  |  | 398 |  |  |  | 380 |
Other long-term liabilities |  |  | 372 |  |  |  | 426 |
Long-term liabilities associated with discontinued operations |  |  | 157 |  |  |  | 185 |
Deferred income taxes |  |  | — |  |  |  | 341 |
Stockholders' equity: |  |  |  |  |  |  |  |
Common stock, $0.10 par value. Authorized 1.0 billion shares; issued 383 million and 382 million shares in 2020 and 2019, respectively |  |  | 38 |  |  |  | 38 |
Additional paid-in capital |  |  | 2,750 |  |  |  | 2,735 |
Retained earnings |  |  | 351 |  |  |  | 3,148 |
Accumulated other comprehensive loss |  |  | (116 | ) |  |  | (119 | )
Total stockholders’ equity attributable to Devon |  |  | 3,023 |  |  |  | 5,802 |
Noncontrolling interests |  |  | 125 |  |  |  | 118 |
Total equity |  |  | 3,148 |  |  |  | 5,920 |
Total liabilities and equity |  | $ | 10,326 |  |  | $ | 13,717 |

See accompanying notes to consolidated financial statements

8

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Other |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | Additional |  |  |  |  |  |  | Comprehensive |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Common Stock |  |  | Paid-In |  |  | Retained |  |  | Earnings |  |  | Treasury |  |  | Noncontrolling |  |  | Total |
|  | Shares |  |  | Amount |  |  | Capital |  |  | Earnings |  |  | (Loss) |  |  | Stock |  |  | Interests |  |  | Equity |
|  | (Unaudited) |
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 |
Three Months Ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of June 30, 2019 |  |  | 410 |  |  | $ | 41 |  |  | $ | 3,352 |  |  | $ | 3,738 |  |  | $ | (117 | ) |  | $ | (20 | ) |  | $ | — |  |  | $ | 6,994 |
Net earnings |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 109 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 109 |
Other comprehensive earnings, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | — |  |  |  | 1 |
Common stock repurchased |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (549 | ) |  |  | — |  |  |  | (549 | )
Common stock retired |  |  | (23 | ) |  |  | (2 | ) |  |  | (559 | ) |  |  | — |  |  |  | — |  |  |  | 561 |  |  |  | — |  |  |  | — |
Common stock dividends |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (35 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (35 | )
Share-based compensation |  |  | — |  |  |  | — |  |  |  | 22 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 22 |
Balance as of September 30, 2019 |  |  | 387 |  |  | $ | 39 |  |  | $ | 2,815 |  |  | $ | 3,812 |  |  | $ | (116 | ) |  | $ | (8 | ) |  | $ | — |  |  | $ | 6,542 |
Nine Months Ended September 30, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of December 31, 2019 |  |  | 382 |  |  | $ | 38 |  |  | $ | 2,735 |  |  | $ | 3,148 |  |  | $ | (119 | ) |  | $ | — |  |  | $ | 118 |  |  | $ | 5,920 |
Net earnings (loss) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,578 | ) |  |  | — |  |  |  | — |  |  |  | 5 |  |  |  | (2,573 | )
Other comprehensive earnings, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3 |  |  |  | — |  |  |  | — |  |  |  | 3 |
Restricted stock grants, net of cancellations |  |  | 3 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Common stock repurchased |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (55 | ) |  |  | — |  |  |  | (55 | )
Common stock retired |  |  | (3 | ) |  |  | — |  |  |  | (55 | ) |  |  | — |  |  |  | — |  |  |  | 55 |  |  |  | — |  |  |  | — |
Common stock dividends |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (219 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (219 | )
Share-based compensation |  |  | 1 |  |  |  | — |  |  |  | 70 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 70 |
Contributions from noncontrolling interests |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 12 |  |  |  | 12 |
Distributions to noncontrolling interests |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (10 | ) |  |  | (10 | )
Balance as of September 30, 2020 |  |  | 383 |  |  | $ | 38 |  |  | $ | 2,750 |  |  | $ | 351 |  |  | $ | (116 | ) |  | $ | — |  |  | $ | 125 |  |  | $ | 3,148 |
Nine Months Ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance as of December 31, 2018 |  |  | 450 |  |  | $ | 45 |  |  | $ | 4,486 |  |  | $ | 3,650 |  |  | $ | 1,027 |  |  | $ | (22 | ) |  | $ | — |  |  | $ | 9,186 |
Effect of adoption of lease accounting |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (19 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (19 | )
Net earnings |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 287 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 287 |
Other comprehensive loss, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,143 | ) |  |  | — |  |  |  | — |  |  |  | (1,143 | )
Restricted stock grants, net of cancellations |  |  | 3 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Common stock repurchased |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,755 | ) |  |  | — |  |  |  | (1,755 | )
Common stock retired |  |  | (66 | ) |  |  | (6 | ) |  |  | (1,763 | ) |  |  | — |  |  |  | — |  |  |  | 1,769 |  |  |  | — |  |  |  | — |
Common stock dividends |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (106 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (106 | )
Share-based compensation |  |  | — |  |  |  | — |  |  |  | 92 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 92 |
Balance as of September 30, 2019 |  |  | 387 |  |  | $ | 39 |  |  | $ | 2,815 |  |  | $ | 3,812 |  |  | $ | (116 | ) |  | $ | (8 | ) |  | $ | — |  |  | $ | 6,542 |

See accompanying notes to consolidated financial statements

9

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. | Summary of Significant Accounting Policies

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 2019 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 September 30, 2020 and 2019 and Devon’s financial position as of September 30, 2020. As further discussed in Note 17, Devon closed on the sale of its Barnett Shale assets on October 1, 2020, and sold its Canadian operations in the second quarter of 2019. Activity relating to Devon’s Barnett Shale assets, inclusive of properties divested as partial sales of the Barnett Shale common operating field in previous reporting periods located primarily in Johnson and Wise counties, Texas, and its Canadian operations are classified as discontinued operations within Devon’s consolidated statements of comprehensive earnings and consolidated statements of cash flows. The associated assets and liabilities of Devon’s Barnett Shale assets and Canadian operations are presented as assets and liabilities associated with discontinued operations on the consolidated balance sheets.

During the fourth quarter of 2019, Devon entered into an agreement to form Cotton Draw Midstream, L.L.C. (“CDM”), a joint-venture entity in the Delaware Basin with an affiliate of QL Capital Partners, LP (“QLCP”). 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, on Devon's consolidated balance sheets if material.

Disaggregation of Revenue

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

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Oil |  | $ | 504 |  |  | $ | 751 |  |  | $ | 1,462 |  |  | $ | 2,160 |
Gas |  |  | 79 |  |  |  | 80 |  |  |  | 221 |  |  |  | 291 |
NGL |  |  | 95 |  |  |  | 88 |  |  |  | 226 |  |  |  | 323 |
Oil, gas and NGL sales |  |  | 678 |  |  |  | 919 |  |  |  | 1,909 |  |  |  | 2,774 |
Oil |  |  | 233 |  |  |  | 407 |  |  |  | 702 |  |  |  | 1,157 |
Gas |  |  | 97 |  |  |  | 140 |  |  |  | 268 |  |  |  | 530 |
NGL |  |  | 143 |  |  |  | 151 |  |  |  | 390 |  |  |  | 506 |
Total marketing revenues |  |  | 473 |  |  |  | 698 |  |  |  | 1,360 |  |  |  | 2,193 |
Midstream revenues |  |  | 3 |  |  |  | 2 |  |  |  | 7 |  |  |  | 2 |
Marketing and midstream revenues |  |  | 476 |  |  |  | 700 |  |  |  | 1,367 |  |  |  | 2,195 |
Total revenues from contracts with customers |  | $ | 1,154 |  |  | $ | 1,619 |  |  | $ | 3,276 |  |  | $ | 4,969 |

10

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Recently Adopted Accounting Standards

In 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. This ASU changes the impairment model for trade receivables, held-to-maturity debt securities, net investments in leases, loans and other financial assets measured at amortized cost from the current “incurred loss” model to a new forward-looking “expected loss” model. Devon adopted this ASU in the first quarter of 2020 using the modified retrospective approach. Devon assesses credit risk by class of account type which includes cash equivalents and oil and gas, marketing and midstream, joint interest and other accounts receivable. These classes are then further evaluated using a probability weighted scenario assessment based on historical losses and a probability of future default. This evaluation is supported by an assessment of risk factors such as the age of receivable, current macro-economic conditions, credit rating of the counterparty and our historical loss rate. This adoption did not have a material impact on Devon’s consolidated financial statements.

2.Acquisitions and Divestitures

Divestitures

Discontinued Operations – Upstream Assets

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, including a $170 million deposit previously received in April 2020. 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 commences on January 1, 2021 and has a term of four years. Devon recognized a $748 million asset impairment related to these assets in the fourth quarter of 2019 and incremental asset impairments of $179 million and $3 million during the first quarter and third quarter of 2020, respectively. Additional information can be found in Note 17.

In June 2019, Devon completed the sale of substantially all of its oil and gas assets and operations in Canada to Canadian Natural Resources Limited for proceeds, net of purchase price adjustments, of $2.6 billion ($3.4 billion Canadian dollars), and recognized a pre-tax gain of $223 million ($425 million, net of tax, primarily due to a significant deferred tax benefit) in 2019. Additional information can be found in Note 17.

Continuing Operations – Upstream Assets

During the first quarter of 2020, Devon entered into a farmout agreement in which the third party to the agreement can participate in the development of certain Devon-owned non-operated interests in the Delaware Basin. Under the agreement, Devon will periodically transfer working interests to the third party, who will then fund its share of operating and development costs. Once certain investment hurdles are met, a portion of the working interest held by the third party will revert back to Devon. No material activity occurred during the first nine months of 2020.

In the first quarter of 2019, Devon received proceeds of approximately $300 million and recognized a $45 million net gain on asset dispositions, primarily from sales of non-core assets in the Permian Basin. In aggregate, the total estimated proved reserves associated with these divested assets were approximately 25 MMBoe.

Pending Merger

On September 26, 2020, Devon and WPX entered into the Merger Agreement, providing for an all-stock merger of equals. WPX is 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 will be automatically converted into the right to receive 0.5165 of a share of Devon common stock. No fractional shares of Devon’s common stock will be issued in the Merger, and holders of shares of WPX common stock will, instead, receive cash in lieu of fractional shares of Devon common stock, if any. The Merger has been unanimously approved by Devon and WPX Boards of Directors and is still subject to the approval of both Devon and WPX shareholders. The Merger is expected to close in the first quarter of 2021 subject to shareholder and regulatory approvals and other customary closing conditions.

11

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

3.Derivative Financial Instruments

Objectives and Strategies

Devon enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production to hedge future prices received. Additionally, Devon periodically enters into derivative financial instruments with respect to a portion of its oil, gas and NGL marketing activities. These commodity derivative financial instruments include financial price swaps, basis swaps and costless price collars. Devon periodically enters into interest rate swaps to manage its exposure to interest rate volatility. As of September 30, 2020, 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.

Counterparty Credit Risk

By using derivative financial instruments, Devon is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with a number of counterparties whom Devon believes are acceptable credit risks. It is Devon’s policy to enter into derivative contracts only with investment-grade rated counterparties deemed by management to be competent and competitive market makers. Additionally, Devon’s derivative contracts generally contain provisions that provide for collateral payments if Devon’s or its counterparty’s credit rating falls below certain credit rating levels. As of September 30, 2020, Devon neither held cash collateral of its counterparties nor posted cash collateral to its counterparties.

Commodity Derivatives

As of September 30, 2020, 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 Collars |
Period |  | Volume (Bbls/d) |  |  | Weighted Average Price ($/Bbl) |  |  | Volume (Bbls/d) |  |  | Weighted Average Floor Price ($/Bbl) |  |  | Weighted Average Ceiling Price ($/Bbl) |
Q4 2020 |  |  | 88,000 |  |  | $ | 36.28 |  |  |  | 39,500 |  |  | $ | 50.93 |  |  | $ | 60.93 |
Q1-Q4 2021 |  |  | 23,810 |  |  | $ | 35.79 |  |  |  | 19,367 |  |  | $ | 40.66 |  |  | $ | 50.66 |
Q1 2022 |  |  | 500 |  |  | $ | 45.00 |  |  |  | 6,750 |  |  | $ | 37.93 |  |  | $ | 47.93 |

|  | Oil Basis Swaps |
Period |  | Index |  | Volume (Bbls/d) |  |  | Weighted Average Differential to WTI ($/Bbl) |
Q4 2020 |  | Argus MEH |  |  | 50,000 |  |  | $ | 0.47 |
Q4 2020 |  | Midland Sweet |  |  | 32,000 |  |  | $ | (1.23 | )
Q4 2020 |  | NYMEX Roll |  |  | 54,000 |  |  | $ | 0.38 |
Q1-Q4 2021 |  | Midland Sweet |  |  | 7,000 |  |  | $ | 1.27 |

12

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

As of September 30, 2020, 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. The second table presents Devon’s natural gas derivatives that settle against the respective indices noted within the table.

|  | Price Swaps |  |  | Price Collars |
Period |  | Volume (MMBtu/d) |  |  | Weighted Average Price ($/MMBtu) |  |  | Volume (MMBtu/d) |  |  | Weighted Average Floor Price ($/MMBtu) |  |  | Weighted Average Ceiling Price ($/MMBtu) |
Q4 2020 |  |  | 69,000 |  |  | $ | 2.69 |  |  |  | 141,000 |  |  | $ | 2.35 |  |  | $ | 2.85 |
Q1-Q4 2021 |  |  | 32,699 |  |  | $ | 2.76 |  |  |  | 142,055 |  |  | $ | 2.38 |  |  | $ | 2.88 |
Q1 2022 |  |  | 14,000 |  |  | $ | 2.85 |  |  |  | 36,000 |  |  | $ | 2.60 |  |  | $ | 3.10 |

|  | Natural Gas Basis Swaps |
Period |  | Index |  | Volume (MMBtu/d) |  |  | Weighted Average Differential to Henry Hub ($/MMBtu) |
Q4 2020 |  | Panhandle Eastern Pipe Line |  |  | 30,000 |  |  | $ | (0.47 | )
Q4 2020 |  | El Paso Natural Gas |  |  | 65,000 |  |  | $ | (0.78 | )
Q4 2020 |  | Houston Ship Channel |  |  | 30,000 |  |  | $ | (0.02 | )
Q1-Q4 2021 |  | El Paso Natural Gas |  |  | 35,000 |  |  | $ | (0.92 | )

As of September 30, 2020, 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.

|  |  |  | Price Swaps |
Period |  | Product |  | Volume (Bbls/d) |  |  | Weighted Average Price ($/Bbl) |
Q4 2020 |  | Natural Gasoline |  |  | 1,000 |  |  | $ | 44.84 |
Q4 2020 |  | Normal Butane |  |  | 1,500 |  |  | $ | 23.56 |
Q4 2020 |  | Propane |  |  | 4,500 |  |  | $ | 25.18 |

Financial Statement Presentation

The following table presents the derivative fair values by derivative financial instrument type followed by the corresponding individual consolidated balance sheets caption.

|  | September 30, 2020 |  |  | December 31, 2019 |
Commodity derivative assets: |  |  |  |  |  |  |  |
Other current assets |  | $ | 27 |  |  | $ | 49 |
Other long-term assets |  |  | 1 |  |  |  | 1 |
Total derivative assets |  | $ | 28 |  |  | $ | 50 |
Commodity derivative liabilities: |  |  |  |  |  |  |  |
Other current liabilities |  | $ | 70 |  |  | $ | 30 |
Other long-term liabilities |  |  | 10 |  |  |  | 1 |
Total derivative liabilities |  | $ | 80 |  |  | $ | 31 |

13

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

4.Share-Based Compensation

The table below presents the share-based compensation expense included in Devon’s accompanying consolidated statements of comprehensive earnings. The vesting for certain share-based awards was accelerated in 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.

|  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |
G&A |  | $ | 58 |  |  | $ | 64 |
Exploration expenses |  |  | 1 |  |  |  | 1 |
Restructuring and transaction costs |  |  | 11 |  |  |  | 27 |
Total |  | $ | 70 |  |  | $ | 92 |
Related income tax benefit |  | $ | — |  |  | $ | 13 |

Under its approved long-term incentive plan, Devon granted share-based awards to certain employees in the first nine months of 2020. The following table presents a summary of Devon’s unvested restricted stock awards, performance-based restricted stock awards and performance share units granted under the plan.

|  |  |  |  | Performance-Based |  |  | Performance |
|  | Restricted Stock Awards |  |  | Restricted Stock Awards |  |  | Share Units |
|  | Awards |  |  | Weighted Average Grant-Date Fair Value |  |  | Awards |  |  | Weighted Average Grant-Date Fair Value |  |  | Units |  |  |  |  |  | Weighted Average Grant-Date Fair Value |
|  | (Thousands, except fair value data) |
Unvested at 12/31/19 |  |  | 4,984 |  |  | $ | 29.65 |  |  |  | 153 |  |  | $ | 33.88 |  |  |  | 2,155 |  |  |  |  |  | $ | 40.35 |
Granted |  |  | 3,056 |  |  | $ | 21.90 |  |  |  | — |  |  | $ | — |  |  |  | 688 |  |  |  |  |  | $ | 27.89 |
Vested |  |  | (2,093 | ) |  | $ | 29.11 |  |  |  | (109 | ) |  | $ | 29.51 |  |  |  | (455 | ) |  |  |  |  | $ | 52.56 |
Forfeited |  |  | (294 | ) |  | $ | 24.44 |  |  |  | — |  |  | $ | — |  |  |  | (385 | ) |  |  |  |  | $ | 47.68 |
Unvested at 9/30/20 |  |  | 5,653 |  |  | $ | 25.93 |  |  |  | 44 |  |  | $ | 44.70 |  |  |  | 2,003 |  |  | (1 | ) |  | $ | 31.89 |

(1) | A maximum of 4.0 million common shares could be awarded based upon Devon’s final TSR ranking.

The following table presents the assumptions related to the performance share units granted in 2020, as indicated in the previous summary table.

|  | 2020 |
Grant-date fair value |  | $ | 27.89 |
Risk-free interest rate |  | 1.36% |
Volatility factor |  | 38.4% |
Contractual term (years) |  | 2.89 |

The following table presents a summary of the unrecognized compensation cost and the related weighted average recognition period associated with unvested awards and units as of September 30, 2020.

|  |  |  |  |  | Performance-Based |  |  |  |  |
|  | Restricted Stock |  |  | Restricted Stock |  |  | Performance |
|  | Awards |  |  | Awards |  |  | Share Units |
Unrecognized compensation cost |  | $ | 81 |  |  | $ | — |  |  | $ | 15 |
Weighted average period for recognition (years) |  |  | 2.6 |  |  |  | 0.7 |  |  |  | 1.7 |

14

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

5.Asset Impairments

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

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Proved oil and gas assets |  | $ | — |  |  | $ | — |  |  | $ | 2,664 |  |  | $ | — |
Other assets |  |  | — |  |  |  | — |  |  |  | 2 |  |  |  | — |
Total asset impairments |  | $ | — |  |  | $ | — |  |  | $ | 2,666 |  |  | $ | — |
Unproved impairments |  | $ | 36 |  |  | $ | 13 |  |  | $ | 149 |  |  | $ | 15 |

Proved Oil and Gas and Other Asset Impairments

Reduced demand from the COVID-19 pandemic caused an unprecedented downturn in the price of oil. As a result, Devon reduced planned 2020 capital investment by 45%. With materially lower commodity prices and reduced near-term investment, Devon assessed all of its oil and gas fields for impairment as of March 31, 2020. For impairment determinations, Devon historically utilized NYMEX forward strip prices for the first five years and applied internally generated price forecasts for subsequent years. In response to the COVID-19 pandemic, the NYMEX forward market became highly illiquid as evidenced by materially reduced trading volumes for periods beyond 2021. Therefore, Devon supplemented the NYMEX forward strip prices with price forecasts published by reputable investment banks and reservoir engineering firms to estimate future revenues as of March 31, 2020. To measure indicated impairments, Devon used a market-based weighted-average cost of capital to discount the future net cash flows. These inputs are categorized as level 3 in the fair value hierarchy.

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 than they are today. During the first quarter of 2020, Devon recognized $2 million of product line fill impairments.

Unproved Impairments

Due to the downturn in the commodity price environment and reduced near-term investment as discussed above, Devon also recognized $149 million of unproved impairments during the first nine months of 2020. Of these unproved impairments, $113 million related primarily to the Rockies field and $36 million related to certain non-core acreage Devon no longer intends to pursue for exploration opportunities. During the first nine months of 2019, Devon recognized $15 million of unproved impairments related to certain non-core acreage it no longer intended to pursue for exploration opportunities.

6.Restructuring and Transaction Costs

In August 2020, Devon announced a cost reduction plan designed to deliver sustainable cost savings by year-end 2020. As a result, Devon recognized $32 million of restructuring expenses during the third quarter of 2020. Of these expenses, $11 million resulted from accelerated vesting of share-based grants, which are noncash charges.

During the first quarter of 2019, Devon announced workforce reductions and other initiatives designed to enhance its operational focus and cost structure in conjunction with the portfolio transformation discussed in Note 2. As a result, Devon recognized $73 million of restructuring expenses during the first nine months of 2019. Of these expenses, $27 million resulted from accelerated vesting of share-based grants, which are noncash charges. Additionally, $5 million resulted from settlements of defined retirement benefits.

15

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

The following table summarizes Devon’s restructuring liabilities.

|  | Other |  |  | Other |  |  |  |  |
|  | Current |  |  | Long-term |  |  |  |  |
|  | Liabilities |  |  | Liabilities |  |  | Total |
|  | (Millions) |
Balance as of December 31, 2019 |  | $ | 20 |  |  | $ | 1 |  |  | $ | 21 |
Changes related to 2020 workforce reductions |  |  | 11 |  |  |  | — |  |  |  | 11 |
Changes related to prior years' restructurings |  |  | (14 | ) |  |  | — |  |  |  | (14 | )
Balance as of September 30, 2020 |  | $ | 17 |  |  | $ | 1 |  |  | $ | 18 |
Balance as of December 31, 2018 |  | $ | 39 |  |  | $ | 3 |  |  | $ | 42 |
Changes related to prior years' restructurings |  |  | (9 | ) |  |  | (2 | ) |  |  | (11 | )
Balance as of September 30, 2019 |  | $ | 30 |  |  | $ | 1 |  |  | $ | 31 |

7.Income Taxes

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

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Earnings (loss) from continuing operations before income taxes |  | $ | (193 | ) |  | $ | 190 |  |  | $ | (2,980 | ) |  | $ | (88 | )
Current income tax expense (benefit) |  | $ | (90 | ) |  | $ | 2 |  |  | $ | (199 | ) |  | $ | 1 |
Deferred income tax expense (benefit) |  |  | — |  |  |  | 52 |  |  |  | (311 | ) |  |  | 2 |
Total income tax expense (benefit) |  | $ | (90 | ) |  | $ | 54 |  |  | $ | (510 | ) |  | $ | 3 |
U.S. statutory income tax rate |  |  | 21 | % |  |  | 21 | % |  |  | 21 | % |  |  | 21 | %
State income taxes |  |  | 0 | % |  |  | 6 | % |  |  | 1 | % |  |  | (2 | %)
Change in tax legislation |  |  | 4 | % |  |  | 0 | % |  |  | 3 | % |  |  | 0 | %
Unrecognized tax benefits |  |  | 18 | % |  |  | 0 | % |  |  | 0 | % |  |  | (2 | %)
Other |  |  | 0 | % |  |  | 1 | % |  |  | (1 | %) |  |  | (20 | %)
Deferred tax asset valuation allowance |  |  | 4 | % |  |  | 0 | % |  |  | (7 | %) |  |  | 0 | %
Effective income tax rate |  |  | 47 | % |  |  | 28 | % |  |  | 17 | % |  |  | (3 | %)

Devon estimates its annual effective income tax rate to record its quarterly provision for income taxes in the various jurisdictions in which it operates. Statutory tax rate changes and other significant or unusual items are recognized as discrete items in the quarter in which they occur.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) became law on March 27, 2020. The CARES Act allows net operating losses generated in taxable years beginning after December 31, 2017 and before January 1, 2021 to be carried back five years to offset taxable income and recoup previously paid taxes. As a result, Devon intends to carry back net operating losses generated in 2019 and 2020 to 2014 and 2015, respectively, and recorded a $105 million income tax benefit through the first nine months of 2020.

On July 28, 2020, the Department of Treasury issued final regulations regarding the provision of the Tax Cuts and Jobs Act that limits the deduction for business interest expense. Prior to the issuance of these final regulations, Devon had reduced its CARES Act income tax benefit by $34 million due to the business interest expense limitation. With the regulatory update, Devon was able to reverse the $34 million in the third quarter of 2020 and recognize the full $105 million of benefit under the CARES Act.

Throughout 2019, Devon maintained a valuation allowance against certain deferred tax assets, including certain tax credits and state net operating losses. Since then, reduced demand from the COVID-19 pandemic has caused an unprecedented downturn in the commodity price environment. As a result, Devon recorded significant impairments during the first quarter of 2020 and is now in a net

16

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

deferred tax asset position. Consequently, Devon reassessed its position and recorded a 100% valuation allowance against all net deferred tax assets and has maintained a full valuation allowance position throughout 2020.

In the table above, the “other” effect is composed of permanent differences primarily related to stock compensation for which dollar amounts do not increase or decrease in relation to the change in pre-tax earnings. Such items have an insignificant impact on Devon’s effective income tax rate unless pre-tax earnings or losses are relatively small in amount. In total, “other” represents $18 million of income tax expense in the first nine months of 2019.

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

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

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net earnings (loss) from continuing operations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net earnings (loss) from continuing operations |  | $ | (105 | ) |  | $ | 136 |  |  | $ | (2,475 | ) |  | $ | (91 | )
Attributable to participating securities |  |  | (2 | ) |  |  | (1 | ) |  |  | (3 | ) |  |  | (1 | )
Basic and diluted earnings (loss) from continuing operations |  | $ | (107 | ) |  | $ | 135 |  |  | $ | (2,478 | ) |  | $ | (92 | )
Common shares: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common shares outstanding - total |  |  | 383 |  |  |  | 397 |  |  |  | 383 |  |  |  | 415 |
Attributable to participating securities |  |  | (6 | ) |  |  | (5 | ) |  |  | (6 | ) |  |  | (6 | )
Common shares outstanding - basic |  |  | 377 |  |  |  | 392 |  |  |  | 377 |  |  |  | 409 |
Dilutive effect of potential common shares issuable |  |  | — |  |  |  | 2 |  |  |  | — |  |  |  | — |
Common shares outstanding - diluted |  |  | 377 |  |  |  | 394 |  |  |  | 377 |  |  |  | 409 |
Net earnings (loss) per share from continuing operations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (0.29 | ) |  | $ | 0.34 |  |  | $ | (6.58 | ) |  | $ | (0.22 | )
Diluted |  | $ | (0.29 | ) |  | $ | 0.34 |  |  | $ | (6.58 | ) |  | $ | (0.22 | )
Antidilutive options (1) |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | 1 |

(1) | Amounts represent options to purchase shares of Devon’s common stock that are excluded from the diluted net earnings per share calculations because the options are antidilutive.

9. | Other Comprehensive Earnings (Loss)

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

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Foreign currency translation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning accumulated foreign currency translation and other |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,159 |
Change in cumulative translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 78 |
Release of Canadian cumulative translation adjustment (1) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,237 | )
Ending accumulated foreign currency translation and other |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Pension and postretirement benefit plans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning accumulated pension and postretirement benefits |  |  | (117 | ) |  |  | (117 | ) |  |  | (119 | ) |  |  | (132 | )
Recognition of net actuarial loss and prior service cost in earnings (2) |  |  | 1 |  |  |  | 1 |  |  |  | 4 |  |  |  | 5 |
Curtailment and settlement of pension benefits(3) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 15 |
Income tax expense |  |  | — |  |  |  | — |  |  |  | (1 | ) |  |  | (4 | )
Ending accumulated pension and postretirement benefits |  |  | (116 | ) |  |  | (116 | ) |  |  | (116 | ) |  |  | (116 | )
Accumulated other comprehensive loss, net of tax |  | $ | (116 | ) |  | $ | (116 | ) |  | $ | (116 | ) |  | $ | (116 | )

17

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

| (1) | In conjunction with the sale of substantially all of its oil and gas assets and operations in Canada, Devon released the cumulative translation adjustment as part of its gain on the disposition of its Canadian business. See Note 17 for additional details.

| (2) | Recognition of net actuarial loss and prior service cost are included in the computation of net periodic benefit cost, which is a component of other expenses in the accompanying consolidated statements of comprehensive earnings.

| (3) | These accumulated other comprehensive earnings are included within components of other expenses and restructuring and transaction costs in the accompanying consolidated comprehensive statements of earnings.

10. | Supplemental Information to Statements of Cash Flows

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Changes in assets and liabilities, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  | $ | 21 |  |  | $ | 55 |  |  | $ | 339 |  |  | $ | 65 |
Income tax receivable |  |  | — |  |  |  | (12 | ) |  |  | (112 | ) |  |  | (13 | )
Other current assets |  |  | 18 |  |  |  | 15 |  |  |  | 10 |  |  |  | 18 |
Other long-term assets |  |  | (9 | ) |  |  | 14 |  |  |  | (33 | ) |  |  | (1 | )
Accounts payable |  |  | 11 |  |  |  | 23 |  |  |  | 9 |  |  |  | (14 | )
Revenues and royalties payable |  |  | 89 |  |  |  | (72 | ) |  |  | (169 | ) |  |  | (88 | )
Other current liabilities |  |  | 15 |  |  |  | 12 |  |  |  | (82 | ) |  |  | (77 | )
Other long-term liabilities |  |  | (87 | ) |  |  | 1 |  |  |  | (59 | ) |  |  | 10 |
Total |  | $ | 58 |  |  | $ | 36 |  |  | $ | (97 | ) |  | $ | (100 | )
Supplementary cash flow data - total operations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest paid |  | $ | 64 |  |  | $ | 81 |  |  | $ | 194 |  |  | $ | 242 |
Income taxes paid (received) |  | $ | (2 | ) |  | $ | — |  |  | $ | 170 |  |  | $ | 16 |

As of September 30, 2020 and December 31, 2019, Devon had approximately $130 million and $250 million, respectively, of accrued capital expenditures included in “Total property and equipment, net” and “Accounts payable” on the consolidated balance sheets.

11. | Accounts Receivable

Components of accounts receivable include the following:

|  | September 30, 2020 |  |  | December 31, 2019 |
Oil, gas and NGL sales |  | $ | 276 |  |  | $ | 452 |
Joint interest billings |  |  | 58 |  |  |  | 168 |
Marketing and midstream revenues |  |  | 147 |  |  |  | 207 |
Other |  |  | 23 |  |  |  | 13 |
Gross accounts receivable |  |  | 504 |  |  |  | 840 |
Allowance for doubtful accounts |  |  | (11 | ) |  |  | (8 | )
Net accounts receivable |  | $ | 493 |  |  | $ | 832 |

18

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

12.Property, Plant and Equipment

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

|  | September 30, 2020 |  |  | December 31, 2019 |
Property and equipment: |  |  |  |  |  |  |  |
Proved |  | $ | 28,407 |  |  | $ | 27,668 |
Unproved and properties under development |  |  | 432 |  |  |  | 583 |
Total oil and gas |  |  | 28,839 |  |  |  | 28,251 |
Less accumulated DD&A |  |  | (24,286 | ) |  |  | (20,693 | )
Oil and gas property and equipment, net |  |  | 4,553 |  |  |  | 7,558 |
Other property and equipment |  |  | 1,746 |  |  |  | 1,725 |
Less accumulated DD&A |  |  | (743 | ) |  |  | (690 | )
Other property and equipment, net (1) |  |  | 1,003 |  |  |  | 1,035 |
Property and equipment, net |  | $ | 5,556 |  |  | $ | 8,593 |

| (1) | $100 million and $80 million related to CDM in 2020 and 2019, respectively.

During the first nine months of 2020, Devon recognized asset impairments of $2.7 billion primarily related to proved oil and gas assets and $149 million of unproved impairments, which significantly reduced the carrying value of its property and equipment, net. See Note 5 for additional details.

13. | Debt and Related Expenses

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

|  | September 30, 2020 |  |  | December 31, 2019 |
5.85% due December 15, 2025 |  | $ | 485 |  |  | $ | 485 |
7.50% due September 15, 2027 |  |  | 73 |  |  |  | 73 |
7.875% due September 30, 2031 |  |  | 675 |  |  |  | 675 |
7.95% due April 15, 2032 |  |  | 366 |  |  |  | 366 |
5.60% due July 15, 2041 |  |  | 1,250 |  |  |  | 1,250 |
4.75% due May 15, 2042 |  |  | 750 |  |  |  | 750 |
5.00% due June 15, 2045 |  |  | 750 |  |  |  | 750 |
Net discount on debentures and notes |  |  | (20 | ) |  |  | (20 | )
Debt issuance costs |  |  | (32 | ) |  |  | (35 | )
Total long-term debt |  | $ | 4,297 |  |  | $ | 4,294 |

Devon has a $3.0 billion Senior Credit Facility. As of September 30, 2020, Devon had no 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 noncash financial write-downs such as impairments. As of September 30, 2020, Devon was in compliance with this covenant with a debt-to-capitalization ratio of 19.5%.

Retirement of Senior Notes

In January 2019, Devon repaid $162 million of 6.30% senior notes at maturity.

19

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Net Financing Costs

The following schedule includes the components of net financing costs.

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Interest based on debt outstanding |  | $ | 65 |  |  | $ | 65 |  |  | $ | 195 |  |  | $ | 195 |
Interest income |  |  | (5 | ) |  |  | (10 | ) |  |  | (12 | ) |  |  | (28 | )
Other |  |  | 6 |  |  |  | 5 |  |  |  | 17 |  |  |  | 19 |
Total net financing costs |  | $ | 66 |  |  | $ | 60 |  |  | $ | 200 |  |  | $ | 186 |

14.Leases

The following table presents Devon’s right-of-use assets and lease liabilities as of September 30, 2020 and December 31, 2019.

|  | September 30, 2020 |  |  | December 31, 2019 |
|  | Finance |  |  | Operating |  |  | Total |  |  | Finance |  |  | Operating |  |  | Total |
Right-of-use assets |  | $ | 222 |  |  | $ | 4 |  |  | $ | 226 |  |  | $ | 229 |  |  | $ | 14 |  |  | $ | 243 |
Lease liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current lease liabilities (1) |  | $ | 7 |  |  | $ | 1 |  |  | $ | 8 |  |  | $ | 7 |  |  | $ | 10 |  |  | $ | 17 |
Long-term lease liabilities |  |  | 243 |  |  |  | 2 |  |  |  | 245 |  |  |  | 240 |  |  |  | 4 |  |  |  | 244 |
Total lease liabilities |  | $ | 250 |  |  | $ | 3 |  |  | $ | 253 |  |  | $ | 247 |  |  | $ | 14 |  |  | $ | 261 |

(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.

15. | Asset Retirement Obligations

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

|  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |
Asset retirement obligations as of beginning of period |  | $ | 398 |  |  | $ | 484 |
Liabilities incurred |  |  | 15 |  |  |  | 14 |
Liabilities settled and divested |  |  | (24 | ) |  |  | (50 | )
Revision of estimated obligation |  |  | 4 |  |  |  | (62 | )
Accretion expense on discounted obligation |  |  | 15 |  |  |  | 16 |
Asset retirement obligations as of end of period |  |  | 408 |  |  |  | 402 |
Less current portion |  |  | 10 |  |  |  | 17 |
Asset retirement obligations, long-term |  | $ | 398 |  |  | $ | 385 |

During the first nine months of 2019, Devon reduced its asset retirement obligations by $62 million, primarily due to changes in the future cost estimates and retirement dates for its oil and gas assets. Additionally, during the first nine months of 2019, Devon reduced its asset retirement obligations by $34 million as a result of the non-core asset divestitures. For additional information, see Note 2.

16. | Stockholders’ Equity

Share Repurchase Programs

In March 2018, Devon announced a $1.0 billion share repurchase program. In June 2018, Devon announced the expansion of this program to $4.0 billion. In February 2019, Devon announced a further expansion to $5.0 billion with a December 31, 2019 expiration date. In December 2019, Devon announced a new $1.0 billion share repurchase program with a December 31, 2020 expiration date.

20

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

Under the new program, $800 million of the $1.0 billion authorization wa s conditioned upon the closing of the Barnett Shale divestiture for cash proceeds of at least $725 million. Since the Company received proceeds less than that amount in connection with the Barnett divestiture, we do not expect to complete repurchases in excess of $200 million in the aggregate under the existing repurchase program. Moreover, Devon has temporarily suspended its share repurchase program.

The table below provides information regarding purchases of Devon’s common stock that were made under the respective share repurchase programs (shares in thousands).

|  | Total Number of Shares Purchased |  |  | Dollar Value of Shares Purchased |  |  | Average Price Paid per Share |
$5.0 Billion Plan |  |  |  |  |  |  |  |  |  |  |  |
Full year 2018 |  |  | 78,149 |  |  | $ | 2,978 |  |  | $ | 38.11 |
First quarter 2019 |  |  | 36,141 |  |  |  | 1,024 |  |  |  | 28.33 |
Second quarter 2019 |  |  | 5,911 |  |  |  | 159 |  |  |  | 27.01 |
Third quarter 2019 |  |  | 22,137 |  |  |  | 550 |  |  |  | 24.80 |
Fourth quarter 2019 |  |  | 4,436 |  |  |  | 94 |  |  |  | 21.32 |
Total inception-to-date |  |  | 146,774 |  |  | $ | 4,805 |  |  | $ | 32.74 |
$1.0 Billion Plan |  |  |  |  |  |  |  |  |  |  |  |
First quarter 2020 |  |  | 2,243 |  |  | $ | 38 |  |  | $ | 16.85 |
Total inception-to-date |  |  | 2,243 |  |  | $ | 38 |  |  | $ | 16.85 |

Dividends

The table below summarizes the dividends Devon paid on its common stock.

| Amounts |  |  | Rate Per Share |
Quarter Ended 2020: |  |  |  |  |  |  |
First quarter | $ | 34 |  |  | $ | 0.09 |
Second quarter |  | 42 |  |  | $ | 0.11 |
Third quarter |  | 43 |  |  | $ | 0.11 |
Total year-to-date | $ | 119 |  |  |  |  |
Quarter Ended 2019: |  |  |  |  |  |  |
First quarter | $ | 34 |  |  | $ | 0.08 |
Second quarter |  | 37 |  |  | $ | 0.09 |
Third quarter |  | 35 |  |  | $ | 0.09 |
Total year-to-date | $ | 106 |  |  |  |  |

Devon raised its quarterly dividend by 22%, to $0.11 per share, beginning in the second quarter of 2020. In the second quarter of 2019, Devon increased the quarterly dividend rate from $0.08 to $0.09 per share.

On August 4, 2020, Devon’s Board of Directors approved a $0.26 per share (approximately $100 million total) special dividend which was paid on October 1, 2020 to holders of record as of August 14, 2020. As of September 30, 2020, the accrued dividends payable is included as a component of accounts payable within the accompanying consolidated balance sheets.

17. | Discontinued Operations and Assets Held For Sale

Barnett Shale

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, including a $170 million deposit previously received in April 2020. 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 commences on January 1, 2021 and has a term of four years.

21

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

In connection with the sale of its Barnett Shale assets, approximately $88 million of the U.S. reporting unit goodwill was allocated to the Barnett Shale assets. Additionally, Devon ceased depreciation for all property, plant and equipment classified as assets held for sale on the date the sales agreement was approved by the Board of Directors. Devon also recognized a $748 million asset impairment in the fourth quarter of 2019 related to these assets, primarily due to the difference between the net carrying value and the purchase price, net of estimated customary purchase price adjustments. Additionally, Devon recognized incremental asset impairments of $179 million and $3 million during the first quarter and third quarter of 2020, respectively. The valuation of the future contingent earnout payments included in the September 30, 2020 Barnett Shale impairment computation was $60 million. The value was derived utilizing a Monte Carlo valuation model and qualifies as a level 3 fair value measurement.

As of September 30, 2020, Devon has classified as cash restricted for discontinued operations on the consolidated balance sheets approximately $20 million of cash for obligations associated with the abandonment of certain gas processing contracts related to divestitures of other Barnett Shale assets that occurred in 2018. Cash payments for these charges total approximately $2 million per quarter.

Royalty Matter

Devon is a party to a class action pending in the United States District Court for the Northern District of Texas styled Henry Seeligson et al. v. Devon Energy Production Company, L.P., Case No. 3:16-cv-00082-K. The Seeligson class has been certified and Devon’s request to appeal the class certification was recently denied. The Seeligson class is composed of royalty interest owners under approximately 4,500 oil and gas leases covering properties in the Barnett Shale field in northern Texas. The Seeligson class alleges that Devon breached an implied duty to market by selling natural gas produced from the subject oil and gas leases to a Devon affiliate and failing to obtain the best price reasonably available for the gas. The Seeligson class alleges that this breach resulted in Devon underpaying royalties to the class during the period from January 1, 2008 through March 1, 2014. Although Devon denies the allegations asserted in the Seeligson case, in order to avoid the uncertainty of litigation, Devon recently reached an agreement in principle to settle the class claims. Although this settlement is contingent upon the negotiation and execution of a final definitive settlement agreement and subject to approval by the District Court, Devon recorded a $28 million expense for this matter in its third quarter 2020 discontinued operations. The amount is included within discontinued operations in the consolidated statements of comprehensive earnings and consolidated balance sheets.

Canada

In the second quarter of 2019, Devon completed the sale of its Canadian business for $2.6 billion ($3.4 billion Canadian dollars), net of purchase price adjustments, and recognized a pre-tax gain of $223 million ($425 million net of tax, primarily due to a significant deferred tax benefit) in 2019. Current (cash) income and withholding taxes associated with the Canadian business were approximately $175 million and were paid in the first half of 2020. The disposition of substantially all of Devon’s Canadian oil and gas assets resulted in Devon releasing its historical cumulative foreign currency translation adjustment of $1.2 billion from accumulated other comprehensive earnings to be included within the gain computation. The historical cumulative foreign currency translation portion of the gain is not taxable.

During the third quarter of 2019, Devon utilized a portion of the sales proceeds to early retire $500 million of the 4.00% senior notes due July 15, 2021 and $1.0 billion of the 3.25% senior notes due May 15, 2022. Devon recognized a charge on the early retirement of these notes consisting of $52 million in cash retirement costs and $6 million of noncash charges.

As of September 30, 2020, Devon has classified as cash restricted for discontinued operations on the consolidated balance sheets approximately $170 million of cash for obligations retained related to the Canadian business. The remaining obligations consist of a firm transportation agreement and office leases. Cash payments for these charges total approximately $8 million per quarter.

22

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

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

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | Barnett Shale |  |  | Canada |  |  | Total |  |  | Barnett Shale |  |  | Canada |  |  | Total |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Oil, gas and NGL sales |  | $ | 94 |  |  | $ | — |  |  | $ | 94 |  |  | $ | 263 |  |  | $ | — |  |  | $ | 263 |
Total revenues |  |  | 94 |  |  |  | — |  |  |  | 94 |  |  |  | 263 |  |  |  | — |  |  |  | 263 |
Production expenses |  |  | 66 |  |  |  | — |  |  |  | 66 |  |  |  | 214 |  |  |  | — |  |  |  | 214 |
Asset impairments |  |  | 3 |  |  |  | — |  |  |  | 3 |  |  |  | 182 |  |  |  | — |  |  |  | 182 |
Asset dispositions |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2 | ) |  |  | (2 | )
General and administrative expenses |  |  | — |  |  |  | 2 |  |  |  | 2 |  |  |  | — |  |  |  | 3 |  |  |  | 3 |
Financing costs, net |  |  | — |  |  |  | (1 | ) |  |  | (1 | ) |  |  | — |  |  |  | (3 | ) |  |  | (3 | )
Other expenses |  |  | 27 |  |  |  | (1 | ) |  |  | 26 |  |  |  | 16 |  |  |  | 3 |  |  |  | 19 |
Total expenses |  |  | 96 |  |  |  | — |  |  |  | 96 |  |  |  | 412 |  |  |  | 1 |  |  |  | 413 |
Earnings (loss) from discontinued operations before income taxes |  |  | (2 | ) |  |  | — |  |  |  | (2 | ) |  |  | (149 | ) |  |  | (1 | ) |  |  | (150 | )
Income tax benefit |  |  | — |  |  |  | (15 | ) |  |  | (15 | ) |  |  | (32 | ) |  |  | (15 | ) |  |  | (47 | )
Net earnings (loss) from discontinued operations, net of tax |  | $ | (2 | ) |  | $ | 15 |  |  | $ | 13 |  |  | $ | (117 | ) |  | $ | 14 |  |  | $ | (103 | )
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Oil, gas and NGL sales |  | $ | 101 |  |  | $ | 11 |  |  | $ | 112 |  |  | $ | 365 |  |  | $ | 741 |  |  | $ | 1,106 |
Oil, gas and NGL derivatives |  |  | — |  |  |  | (18 | ) |  |  | (18 | ) |  |  | — |  |  |  | (113 | ) |  |  | (113 | )
Marketing and midstream revenues |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 38 |  |  |  | 38 |
Total revenues |  |  | 101 |  |  |  | (7 | ) |  |  | 94 |  |  |  | 365 |  |  |  | 666 |  |  |  | 1,031 |
Production expenses |  |  | 75 |  |  |  | (1 | ) |  |  | 74 |  |  |  | 232 |  |  |  | 293 |  |  |  | 525 |
Exploration expenses |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 13 |  |  |  | 13 |
Marketing and midstream expenses |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 18 |  |  |  | 18 |
Depreciation, depletion and amortization |  |  | 20 |  |  |  | — |  |  |  | 20 |  |  |  | 60 |  |  |  | 128 |  |  |  | 188 |
Asset impairments |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 37 |  |  |  | 37 |
Asset dispositions |  |  | (1 | ) |  |  | (34 | ) |  |  | (35 | ) |  |  | 1 |  |  |  | (223 | ) |  |  | (222 | )
General and administrative expenses |  |  | — |  |  |  | 2 |  |  |  | 2 |  |  |  | — |  |  |  | 33 |  |  |  | 33 |
Financing costs, net |  |  | — |  |  |  | 59 |  |  |  | 59 |  |  |  | — |  |  |  | 85 |  |  |  | 85 |
Restructuring and transaction costs |  |  | — |  |  |  | 5 |  |  |  | 5 |  |  |  | — |  |  |  | 244 |  |  |  | 244 |
Other expenses |  |  | 3 |  |  |  | 5 |  |  |  | 8 |  |  |  | 9 |  |  |  | 8 |  |  |  | 17 |
Total expenses |  |  | 97 |  |  |  | 36 |  |  |  | 133 |  |  |  | 302 |  |  |  | 636 |  |  |  | 938 |
Earnings from discontinued operations before income taxes |  |  | 4 |  |  |  | (43 | ) |  |  | (39 | ) |  |  | 63 |  |  |  | 30 |  |  |  | 93 |
Income tax expense (benefit) |  |  | 1 |  |  |  | (13 | ) |  |  | (12 | ) |  |  | 13 |  |  |  | (298 | ) |  |  | (285 | )
Net earnings from discontinued operations, net of tax |  | $ | 3 |  |  | $ | (30 | ) |  | $ | (27 | ) |  | $ | 50 |  |  | $ | 328 |  |  | $ | 378 |

23

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

The following table presents the carrying amounts of the assets and liabilities associated with discontinued operations on the consolidated balance sheets.

|  | As of September 30, 2020 |  |  | As of December 31, 2019 |
|  | Barnett Shale |  |  | Canada |  |  | Total |  |  | Barnett Shale |  |  | Canada |  |  | Total |
Cash restricted for discontinued operations |  | $ | 20 |  |  | $ | 170 |  |  | $ | 190 |  |  | $ | 25 |  |  | $ | 355 |  |  | $ | 380 |
Accounts receivable |  | $ | 33 |  |  | $ | — |  |  | $ | 33 |  |  | $ | 38 |  |  | $ | 1 |  |  | $ | 39 |
Other current assets |  |  | 6 |  |  |  | — |  |  |  | 6 |  |  |  | 5 |  |  |  | 2 |  |  |  | 7 |
Oil and gas property and equipment, based on successful efforts accounting, net |  |  | 590 |  |  |  | — |  |  |  | 590 |  |  |  | 751 |  |  |  | — |  |  |  | 751 |
Other property and equipment, net |  |  | 11 |  |  |  | — |  |  |  | 11 |  |  |  | 11 |  |  |  | — |  |  |  | 11 |
Goodwill |  |  | 88 |  |  |  | — |  |  |  | 88 |  |  |  | 88 |  |  |  | — |  |  |  | 88 |
Other long-term assets |  |  | — |  |  |  | 81 |  |  |  | 81 |  |  |  | — |  |  |  | 81 |  |  |  | 81 |
Total assets associated with discontinued operations |  | $ | 728 |  |  | $ | 81 |  |  | $ | 809 |  |  | $ | 893 |  |  | $ | 84 |  |  | $ | 977 |
Accounts payable |  | $ | 17 |  |  | $ | 3 |  |  | $ | 20 |  |  | $ | 15 |  |  | $ | 4 |  |  | $ | 19 |
Revenues and royalties payable |  |  | 42 |  |  |  | 3 |  |  |  | 45 |  |  |  | 44 |  |  |  | 3 |  |  |  | 47 |
Other current liabilities |  |  | 215 |  |  |  | 38 |  |  |  | 253 |  |  |  | 19 |  |  |  | 233 |  |  |  | 252 |
Asset retirement obligations |  |  | 145 |  |  |  | — |  |  |  | 145 |  |  |  | 141 |  |  |  | — |  |  |  | 141 |
Other long-term liabilities |  |  | 14 |  |  |  | 143 |  |  |  | 157 |  |  |  | 16 |  |  |  | 169 |  |  |  | 185 |
Total liabilities associated with discontinued operations |  | $ | 433 |  |  | $ | 187 |  |  | $ | 620 |  |  | $ | 235 |  |  | $ | 409 |  |  | $ | 644 |

18. | Commitments and Contingencies

Devon is party to various legal actions arising in the normal course of business. Matters that are probable of an unfavorable outcome to Devon and which 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. None of the actions are believed by management to likely involve future amounts that would be material to Devon’s financial position or results of operations after consideration of recorded accruals. Actual amounts could differ materially from management’s estimates.

Royalty Matters

Numerous oil and natural gas producers and related parties, including Devon, have been named in various lawsuits alleging royalty underpayments. Devon is currently named as a defendant in a number of such lawsuits, including some lawsuits in which the plaintiffs seek to certify classes of similarly situated plaintiffs. Among the allegations typically asserted in these suits are claims that Devon used below-market prices, made improper deductions, used improper measurement techniques and entered into gas purchase and processing arrangements with affiliates that resulted in underpayment of royalties in connection with oil, natural gas and NGLs produced and sold. Devon is also involved in governmental agency proceedings and royalty audits and is subject to related contracts and regulatory controls in the ordinary course of business, some that may lead to additional royalty claims. Devon does not currently believe that it is subject to material exposure with respect to such royalty matters except those detailed within Note 17.

Environmental and Other Matters

Devon is subject to certain laws and regulations relating to environmental remediation activities associated with past operations, such as the Comprehensive Environmental Response, Compensation, and Liability Act and similar state statutes. In response to liabilities associated with these activities, loss accruals primarily consist of estimated uninsured remediation costs. Devon’s monetary exposure for environmental matters is not expected to be material.

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

24

Table of Contents

DEVON ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Unaudited)

otherwise restore the allegedly impacted areas. Although Devon cannot predict the ultimate outcome of these matters, Devon is vigorously defending against these claims.

Various municipalities and other governmental and private parties in California and the State of Delaware have filed legal proceedings against certain 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.

19. | Fair Value Measurements

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, cash restricted for discontinued operations, 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 September 30, 2020 and December 31, 2019, 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: |
|  | Carrying |  |  | Total Fair |  |  | Level 1 |  |  | Level 2 |
|  | Amount |  |  | Value |  |  | Inputs |  |  | Inputs |
September 30, 2020 assets (liabilities): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 1,171 |  |  | $ | 1,171 |  |  | $ | 1,171 |  |  | $ | — |
Commodity derivatives |  | $ | 28 |  |  | $ | 28 |  |  | $ | — |  |  | $ | 28 |
Commodity derivatives |  | $ | (80 | ) |  | $ | (80 | ) |  | $ | — |  |  | $ | (80 | )
Debt |  | $ | (4,297 | ) |  | $ | (4,635 | ) |  | $ | — |  |  | $ | (4,635 | )
December 31, 2019 assets (liabilities): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 702 |  |  | $ | 702 |  |  | $ | 702 |  |  | $ | — |
Commodity derivatives |  | $ | 50 |  |  | $ | 50 |  |  | $ | — |  |  | $ | 50 |
Commodity derivatives |  | $ | (31 | ) |  | $ | (31 | ) |  | $ | — |  |  | $ | (31 | )
Debt |  | $ | (4,294 | ) |  | $ | (5,376 | ) |  | $ | — |  |  | $ | (5,376 | )

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

Level 1 Fair Value Measurements

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

Level 2 Fair Value Measurements

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.

25

Table of Contents

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 and nine-month periods ended September 30, 2020 compared to previous periods and in our financial condition and liquidity since December 31, 2019. For information regarding our critical accounting policies and estimates, see our 2019 Annual Report on Form 10-K under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

COVID – 19

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. The COVID-19 team is focused on two key priorities: the health and safety of our employees and contractors and the uninterrupted operation of our business.

| • | Health and safety – The COVID-19 team has developed and implemented a number of safety measures, which have successfully kept our workforce healthy and safe. The COVID-19 team has established an informational campaign to provide employees an understanding of the virus risk factors and safety measures, as well as timely updates from governmental stay-at-home regulations. Expectations have also been set for employees to communicate immediately if they, or someone they have been in contact with, has experienced symptoms or tested positive for COVID-19. Other measures have included closing all of Devon’s office buildings and locations to the public, implementing social distancing and encouraging employees to work from home. Beginning in late March, more than 90% of the workforce assigned to Devon’s Oklahoma City Headquarters office were primarily working from home until the vast majority returned to the office late in the second quarter. The COVID-19 team also strongly encourages employees to wear masks, reinforces social distancing measures and continues to perform targeted and routine intensive and deep cleaning of all Devon office locations.

| • | Uninterrupted operation of our business – Beyond workforce safety measures, the COVID-19 team has worked with government officials to ensure our business continues to be deemed an essential business or infrastructure. The COVID-19 team has ensured technology and resources are available for employees to execute their job duties while working from home and implemented further social distancing and contactless initiatives in our oil and gas field operations. The collective efforts of our COVID-19 team and our entire workforce have enabled us to avoid the need to implement COVID-19 containment or mitigation measures, which would require closure or suspension of any of our operations.

This outbreak and the related responses of governmental authorities and others to limit the spread of the virus have significantly reduced global economic activity, resulting in an unprecedented decline in the demand for oil and other commodities. This supply-and-demand imbalance was exacerbated by uncertainty regarding the future global supply of oil due to disputes between Russia and the members of OPEC in March 2020. These factors caused a swift and material deterioration in commodity prices in early 2020, with NYMEX WTI oil prices falling from a high of over $60/Bbl at the beginning of the year to below $20/Bbl in April 2020. By the end of the second quarter of 2020, NYMEX WTI oil prices recovered to approximately $40/Bbl and may remain volatile around this level for the foreseeable future.

On September 26, 2020, we entered into the Merger Agreement, providing for an all-stock merger of equals with WPX. The Merger will create 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 cutting operational and corporate costs, 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:

| • | Efficiency gains drove third quarter capital expenditures 3% below our plan

| • | Third-quarter oil production totaled 146 MBbls/d, exceeding our plan by 4%

| • | Operating costs continued to decline in the third quarter of 2020, led by a 30% and 8% decrease from the year ago quarter for G&A and production expenses, respectively

| • | Reduced workforce to reflect lower and sustainable capital investment program

| • | Exited the third quarter with $4.9 billion of liquidity, including $1.9 billion of cash, with no near-term debt maturities

| • | Closed on the Barnett Shale transaction on October 1, 2020, receiving net proceeds of $490 million

| • | Paid a special dividend of $0.26 per share for approximately $100 million on October 1, 2020

26

Table of Contents

Overview of 2020 Results

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 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 economic environment by protecting our financial strength, tailoring our capital investment to market conditions, improving our cash cost structure and preserving operational continuity.

Trends of our quarterly earnings, operating cash flow, EBITDAX and capital expenditures are shown below. The quarterly earnings chart presents amounts pertaining to both Devon’s continuing and discontinuing operations. The quarterly cash flow chart presents amounts pertaining to Devon’s continuing operations. “Core earnings” and “EBITDAX” are financial measures not prepared in accordance with GAAP. For a description of these measures, including reconciliations to the comparable GAAP measures, see “Non-GAAP Measures” in this Item 2.

Our net earnings in recent quarters have been significantly impacted by divestiture transactions, asset impairments and temporary, noncash adjustments to the value of our commodity hedges. Net earnings in the third quarter of 2020 included a $0.1 billion hedge valuation loss, net of tax. Net earnings in the second quarter of 2020 included a $0.5 billion hedge valuation loss, net of tax. 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. Net earnings in the fourth quarter of 2019 included $0.6 billion of asset impairments and a $0.1 billion hedge valuation loss, 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 were challenged by commodity prices and deterioration of the macro-economic environment resulting from the unprecedented COVID-19 pandemic. Our earnings increased from the second quarter of 2020 to the third quarter of 2020 due to an increase in overall commodity prices. Led by a 44% increase in WTI from the second quarter of 2020 to the third quarter of 2020, our unhedged combined realized price rose 57%, while our hedged price increased 3%. In response to this commodity price environment, we were able to reduce our aggregate production and G&A expenses 14% compared to the year ago quarter.

27

Table of Contents

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 continue to be impacted from the COVID-19 pandemic and declines in commodity prices. As operating cash flow has declined, we have reduced our 2020 capital development plans approximately $800 million, or 45% compared to the original capital budget.

We exited the third quarter of 2020 with $4.9 billion of liquidity comprised of $1.9 billion of cash, inclusive of $190 million of cash restricted for discontinued operations, and $3.0 billion of available credit under our Senior Credit Facility. We have $4.3 billion of debt outstanding with no maturities until the end of 2025. We currently have approximately 50% and 40% of the first half of our 2021 oil and gas production hedged, respectively. These contracts consist of collars and swaps based off the WTI oil benchmark and the Henry Hub natural gas index. Additionally, we have entered into regional basis swaps in an effort to protect price realizations across our portfolio.

Results of Operations

The following graphs, discussion and analysis are intended to provide an understanding of our results of operations and current financial condition. To facilitate the review, these numbers are being presented before consideration of earnings attributable to noncontrolling interests. Analysis of the change in net earnings from continuing operations is shown below and analysis of the change in net earnings from discontinued operations is shown on page 36.

Continuing Operations

Q3 2020 vs. Q2 2020

Our third quarter 2020 net loss from continuing operations was $103 million, compared to a net loss of $677 million for the second quarter of 2020. The graph below shows the change in the net loss from the second quarter of 2020 to the third quarter of 2020. The material changes are further discussed by category on the following pages.

28

Table of Contents

Production Volumes

|  | Q3 2020 |  |  | % of Total |  |  | Q2 2020 |  |  | Change |
Oil (MBbls/d) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Delaware Basin |  |  | 77 |  |  |  | 53 | % |  |  | 79 |  |  |  | - 3 | %
Powder River Basin |  |  | 21 |  |  |  | 14 | % |  |  | 18 |  |  |  | +14 | %
Eagle Ford |  |  | 22 |  |  |  | 15 | % |  |  | 27 |  |  |  | - 19 | %
Anadarko Basin |  |  | 19 |  |  |  | 13 | % |  |  | 21 |  |  |  | - 9 | %
Other |  |  | 7 |  |  |  | 5 | % |  |  | 8 |  |  |  | - 9 | %
Total |  |  | 146 |  |  |  | 100 | % |  |  | 153 |  |  |  | - 5 | %

|  | Q3 2020 |  |  | % of Total |  |  | Q2 2020 |  |  | Change |
Gas (MMcf/d) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Delaware Basin |  |  | 239 |  |  |  | 41 | % |  |  | 241 |  |  |  | - 1 | %
Powder River Basin |  |  | 23 |  |  |  | 4 | % |  |  | 20 |  |  |  | +12 | %
Eagle Ford |  |  | 73 |  |  |  | 12 | % |  |  | 87 |  |  |  | - 16 | %
Anadarko Basin |  |  | 242 |  |  |  | 42 | % |  |  | 262 |  |  |  | - 8 | %
Other |  |  | 3 |  |  |  | 1 | % |  |  | 4 |  |  |  | - 13 | %
Total |  |  | 580 |  |  |  | 100 | % |  |  | 614 |  |  |  | - 6 | %

|  | Q3 2020 |  |  | % of Total |  |  | Q2 2020 |  |  | Change |
NGLs (MBbls/d) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Delaware Basin |  |  | 38 |  |  |  | 46 | % |  |  | 29 |  |  |  | +32 | %
Powder River Basin |  |  | 3 |  |  |  | 3 | % |  |  | 2 |  |  |  | +19 | %
Eagle Ford |  |  | 11 |  |  |  | 14 | % |  |  | 12 |  |  |  | - 1 | %
Anadarko Basin |  |  | 30 |  |  |  | 36 | % |  |  | 25 |  |  |  | +18 | %
Other |  |  | 1 |  |  |  | 1 | % |  |  | 1 |  |  |  | - 2 | %
Total |  |  | 83 |  |  |  | 100 | % |  |  | 69 |  |  |  | +20 | %

|  | Q3 2020 |  |  | % of Total |  |  | Q2 2020 |  |  | Change |
Combined (MBoe/d) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Delaware Basin |  |  | 155 |  |  |  | 48 | % |  |  | 149 |  |  |  | +4 | %
Powder River Basin |  |  | 28 |  |  |  | 9 | % |  |  | 24 |  |  |  | +14 | %
Eagle Ford |  |  | 46 |  |  |  | 14 | % |  |  | 53 |  |  |  | - 14 | %
Anadarko Basin |  |  | 89 |  |  |  | 27 | % |  |  | 90 |  |  |  | - 1 | %
Other |  |  | 8 |  |  |  | 2 | % |  |  | 9 |  |  |  | - 8 | %
Total |  |  | 326 |  |  |  | 100 | % |  |  | 325 |  |  |  | +0 | %

From the second quarter of 2020 to the third quarter of 2020, the change in volumes contributed to a $3 million decrease in earnings. Due to 2020 capital expenditures being reduced by 45% in response to the challenged current macro-economic environment and the timing of completions, volumes continued to remain lower in the third quarter. Volumes for the fourth quarter are expected to range from approximately 318 to 334 MBoe/d.

Field Prices

|  | Q3 2020 |  |  | Realization |  |  | Q2 2020 |  |  | Change |
Oil (per Bbl) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
WTI index |  | $ | 40.86 |  |  |  |  |  |  | $ | 28.42 |  |  |  | +44 | %
Realized price, unhedged |  | $ | 37.56 |  |  | 92% |  |  | $ | 21.25 |  |  |  | +77 | %
Cash settlements |  | $ | 0.65 |  |  |  |  |  |  | $ | 15.25 |  |  |  |  |
Realized price, with hedges |  | $ | 38.21 |  |  | 94% |  |  | $ | 36.50 |  |  |  | +5 | %

|  | Q3 2020 |  |  | Realization |  |  | Q2 2020 |  |  | Change |
Gas (per Mcf) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Henry Hub index |  | $ | 1.98 |  |  |  |  |  |  | $ | 1.71 |  |  |  | +16 | %
Realized price, unhedged |  | $ | 1.48 |  |  | 75% |  |  | $ | 1.29 |  |  |  | +14 | %
Cash settlements |  | $ | 0.06 |  |  |  |  |  |  | $ | 0.28 |  |  |  |  |
Realized price, with hedges |  | $ | 1.54 |  |  | 78% |  |  | $ | 1.57 |  |  |  | - 2 | %

|  | Q3 2020 |  |  | Realization |  |  | Q2 2020 |  |  | Change |
NGLs (per Bbl) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mont Belvieu blended index (1) |  | $ | 16.69 |  |  |  |  |  |  | $ | 12.57 |  |  |  | +33 | %
Realized price, unhedged |  | $ | 12.36 |  |  | 74% |  |  | $ | 8.89 |  |  |  | +39 | %
Cash settlements |  | $ | (0.30 | ) |  |  |  |  |  | $ | 0.51 |  |  |  |  |
Realized price, with hedges |  | $ | 12.06 |  |  | 72% |  |  | $ | 9.40 |  |  |  | +28 | %

(1)Based upon composition of our NGL barrel.

|  | Q3 2020 |  |  | Q2 2020 |  |  | Change |
Combined (per Boe) |  |  |  |  |  |  |  |  |  |  |  |
Realized price, unhedged |  | $ | 22.60 |  |  | $ | 14.37 |  |  |  | +57 | %
Cash settlements |  | $ | 0.33 |  |  | $ | 7.83 |  |  |  |  |
Realized price, with hedges |  | $ | 22.93 |  |  | $ | 22.20 |  |  |  | +3 | %

From the second quarter of 2020 to the third quarter of 2020, field prices contributed to a $257 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 from the second quarter to the third quarter of 2020.

We currently have approximately 50% of the first half of our 2021 oil production hedged with an average floor price of $39/Bbl and approximately 40% of the first half of our 2021 gas production hedged with an average floor price of $2.45/Mcf. We are continuing to build our 2021 and 2022 hedge positions at market prices.

Hedge Settlements

|  | Q3 2020 |  |  | Q2 2020 |  |  | Change |
|  | Q |  |  |  |  |  |  |  |  |
Oil |  | $ | 9 |  |  | $ | 213 |  |  |  | - 96 | %
Natural gas |  |  | 4 |  |  |  | 15 |  |  |  | - 73 | %
NGL |  |  | (3 | ) |  |  | 4 |  |  |  | - 175 | %
Total cash settlements (1) |  | $ | 10 |  |  | $ | 232 |  |  |  | - 96 | %

| (1) | Included as a component of oil, gas and NGL derivatives on the consolidated statements of comprehensive earnings.

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

29

Table of Contents

Production Expenses

|  | Q3 2020 |  |  | Q2 2020 |  |  | Change |
LOE |  | $ | 100 |  |  | $ | 108 |  |  |  | - 7 | %
Gathering, processing & transportation |  |  | 125 |  |  |  | 123 |  |  |  | +2 | %
Production taxes |  |  | 42 |  |  |  | 25 |  |  |  | +68 | %
Property taxes |  |  | 4 |  |  |  | 7 |  |  |  | - 38 | %
Total |  | $ | 271 |  |  | $ | 263 |  |  |  | +3 | %
Per Boe: |  |  |  |  |  |  |  |  |  |  |  |
LOE |  | $ | 3.32 |  |  | $ | 3.69 |  |  |  | - 10 | %
Gathering, processing & transportation |  | $ | 4.17 |  |  | $ | 4.16 |  |  |  | +0 | %
Percent of oil, gas and NGL sales: |  |  |  |  |  |  |  |  |  |  |  |
Production taxes |  |  | 6.2 | % |  |  | 5.9 | % |  |  | +4 | %

Production expenses increased from the second quarter to the third quarter primarily due to increased production taxes resulting from higher oil, gas and NGL sales.

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 GAAP. A reconciliation to the comparable GAAP measures is found in “Non-GAAP Measures” in this Item 2. The changes in production volumes, field prices and production expenses, shown above, had the following impact on our field-level cash margins by asset.

|  | Q3 2020 |  |  | $ per BOE |  |  | Q2 2020 |  |  | $ per BOE |
Field-level cash margin (non-GAAP) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Delaware Basin |  | $ | 236 |  |  | $ | 16.52 |  |  | $ | 106 |  |  | $ | 7.81 |
Powder River Basin |  |  | 47 |  |  | $ | 18.63 |  |  |  | 20 |  |  | $ | 9.09 |
Eagle Ford |  |  | 61 |  |  | $ | 14.66 |  |  |  | 22 |  |  | $ | 4.50 |
Anadarko Basin |  |  | 56 |  |  | $ | 6.72 |  |  |  | 13 |  |  | $ | 1.67 |
Other |  |  | 7 |  |  | $ | 10.10 |  |  |  | — |  |  | $ | 0.10 |
Total |  | $ | 407 |  |  | $ | 13.59 |  |  | $ | 161 |  |  | $ | 5.45 |

Due to higher commodity benchmark prices, our unhedged realized price per Boe increased 57% from the second quarter to the third quarter of 2020. These higher realizations improved our field-level cash margin and other performance measures.

Other Items

|  | Q3 2020 |  |  | Q2 2020 |  |  | Change in earnings |
Commodity hedge valuation changes (1) |  | $ | (97 | ) |  | $ | (593 | ) |  | $ | 496 |
Marketing and midstream operations |  |  | (2 | ) |  |  | (8 | ) |  |  | 6 |
Exploration expenses |  |  | 39 |  |  |  | 12 |  |  |  | (27 | )
Net financing costs |  |  | 66 |  |  |  | 69 |  |  |  | 3 |
Restructuring and transaction costs |  |  | 32 |  |  |  | — |  |  |  | (32 | )
Other expenses |  |  | — |  |  |  | 13 |  |  |  | 13 |
|  |  |  |  |  |  |  |  |  | $ | 459 |

| (1) | Included as a component of oil, gas and NGL derivatives on the consolidated statements of comprehensive earnings.

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

Exploration expenses increased from the second quarter to the third quarter primarily due to unproved impairments of $36 million in the third quarter related to certain non-core acreage we no longer intend to pursue for exploration opportunities. For additional information, see Note 5 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Restructuring and transaction costs reflect workforce reductions that occurred in the third quarter to improve the company’s cost structure and enhance its operational focus. For additional information, see Note 6 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Income Taxes

|  | Q3 2020 |  |  | Q2 2020 |
Current benefit |  | $ | (90 | ) |  | $ | (3 | )
Deferred benefit |  |  | — |  |  |  | — |
Total benefit |  | $ | (90 | ) |  | $ | (3 | )
Effective income tax rate |  |  | 47 | % |  |  | 0 | %

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

30

Table of Contents

2020 vs. 2019

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

Q3 2020 vs. Q3 2019

Our third quarter 2020 net loss from continuing operations was $103 million, compared to net earnings of $136 million in the third quarter of 2019. The graph below shows the change in the net earnings from the third quarter of 2019 to the net loss in the third quarter of 2020. The material changes are further discussed on the following pages.

September 30, YTD 2020 vs. September 30, YTD 2019

Our nine months ended September 30, 2020 net loss from continuing operations was $2.5 billion, compared to a net loss of $91 million for the nine months ended September 30, 2019. The graph below shows the change in the net loss from the nine months ended September 30, 2019 to the nine months ended September 30, 2020. The material changes are further discussed on the following pages.

31

Table of Contents

Production Volumes

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | % of Total |  |  | 2019 |  |  | Change |  |  | 2020 |  |  | % of Total |  |  | 2019 |  |  | Change |
Oil (MBbls/d) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Delaware Basin |  |  | 77 |  |  |  | 53 | % |  |  | 70 |  |  |  | +9 | % |  |  | 80 |  |  |  | 52 | % |  |  | 66 |  |  |  | +22 | %
Powder River Basin |  |  | 21 |  |  |  | 14 | % |  |  | 18 |  |  |  | +16 | % |  |  | 20 |  |  |  | 13 | % |  |  | 16 |  |  |  | +24 | %
Eagle Ford |  |  | 22 |  |  |  | 15 | % |  |  | 22 |  |  |  | - 0 | % |  |  | 25 |  |  |  | 16 | % |  |  | 23 |  |  |  | +7 | %
Anadarko Basin |  |  | 19 |  |  |  | 13 | % |  |  | 32 |  |  |  | - 40 | % |  |  | 21 |  |  |  | 14 | % |  |  | 32 |  |  |  | - 33 | %
Other |  |  | 7 |  |  |  | 5 | % |  |  | 9 |  |  |  | - 25 | % |  |  | 8 |  |  |  | 5 | % |  |  | 8 |  |  |  | - 9 | %
Total |  |  | 146 |  |  |  | 100 | % |  |  | 151 |  |  |  | - 4 | % |  |  | 154 |  |  |  | 100 | % |  |  | 145 |  |  |  | +6 | %
Gas (MMcf/d) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Delaware Basin |  |  | 239 |  |  |  | 41 | % |  |  | 167 |  |  |  | +43 | % |  |  | 241 |  |  |  | 40 | % |  |  | 157 |  |  |  | +53 | %
Powder River Basin |  |  | 23 |  |  |  | 4 | % |  |  | 28 |  |  |  | - 18 | % |  |  | 24 |  |  |  | 4 | % |  |  | 23 |  |  |  | +5 | %
Eagle Ford |  |  | 73 |  |  |  | 12 | % |  |  | 75 |  |  |  | - 2 | % |  |  | 82 |  |  |  | 13 | % |  |  | 80 |  |  |  | +3 | %
Anadarko Basin |  |  | 242 |  |  |  | 42 | % |  |  | 317 |  |  |  | - 24 | % |  |  | 258 |  |  |  | 42 | % |  |  | 321 |  |  |  | - 19 | %
Other |  |  | 3 |  |  |  | 1 | % |  |  | 4 |  |  |  | - 14 | % |  |  | 4 |  |  |  | 1 | % |  |  | 5 |  |  |  | - 33 | %
Total |  |  | 580 |  |  |  | 100 | % |  |  | 591 |  |  |  | - 2 | % |  |  | 609 |  |  |  | 100 | % |  |  | 586 |  |  |  | +4 | %
NGLs (MBbls/d) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Delaware Basin |  |  | 38 |  |  |  | 46 | % |  |  | 28 |  |  |  | +37 | % |  |  | 35 |  |  |  | 45 | % |  |  | 26 |  |  |  | +35 | %
Powder River Basin |  |  | 3 |  |  |  | 3 | % |  |  | 2 |  |  |  | +10 | % |  |  | 3 |  |  |  | 3 | % |  |  | 2 |  |  |  | +23 | %
Eagle Ford |  |  | 11 |  |  |  | 14 | % |  |  | 11 |  |  |  | +6 | % |  |  | 11 |  |  |  | 14 | % |  |  | 12 |  |  |  | - 7 | %
Anadarko Basin |  |  | 30 |  |  |  | 36 | % |  |  | 37 |  |  |  | - 18 | % |  |  | 28 |  |  |  | 37 | % |  |  | 37 |  |  |  | - 22 | %
Other |  |  | 1 |  |  |  | 1 | % |  |  | 1 |  |  |  | - 46 | % |  |  | 1 |  |  |  | 1 | % |  |  | 2 |  |  |  | - 41 | %
Total |  |  | 83 |  |  |  | 100 | % |  |  | 79 |  |  |  | +5 | % |  |  | 78 |  |  |  | 100 | % |  |  | 79 |  |  |  | - 1 | %
Combined (MBoe/d) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Delaware Basin |  |  | 155 |  |  |  | 48 | % |  |  | 127 |  |  |  | +22 | % |  |  | 155 |  |  |  | 46 | % |  |  | 118 |  |  |  | +32 | %
Powder River Basin |  |  | 28 |  |  |  | 9 | % |  |  | 25 |  |  |  | +9 | % |  |  | 27 |  |  |  | 8 | % |  |  | 22 |  |  |  | +21 | %
Eagle Ford |  |  | 46 |  |  |  | 14 | % |  |  | 45 |  |  |  | +1 | % |  |  | 50 |  |  |  | 15 | % |  |  | 48 |  |  |  | +3 | %
Anadarko Basin |  |  | 89 |  |  |  | 27 | % |  |  | 121 |  |  |  | - 26 | % |  |  | 92 |  |  |  | 28 | % |  |  | 123 |  |  |  | - 25 | %
Other |  |  | 8 |  |  |  | 2 | % |  |  | 10 |  |  |  | - 21 | % |  |  | 9 |  |  |  | 3 | % |  |  | 10 |  |  |  | - 5 | %
Total |  |  | 326 |  |  |  | 100 | % |  |  | 328 |  |  |  | - 1 | % |  |  | 333 |  |  |  | 100 | % |  |  | 321 |  |  |  | +4 | %

From the third quarter of 2019 to the third quarter of 2020, a decrease in volumes contributed to a $19 million decrease in earnings. From the nine months ended 2019 to the nine months ended 2020, an increase in volumes contributed to a $148 million increase in earnings. Continued development in the Delaware Basin and Powder River Basin has resulted in higher production volumes during 2020 compared to 2019. These increases were partially offset by significantly lower activity in the Anadarko Basin.

32

Table of Contents

Field Prices

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | Realization |  |  | 2019 |  |  | Change |  |  | 2020 |  |  | Realization |  |  | 2019 |  |  | Change |
Oil (per Bbl) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
WTI index |  | $ | 40.86 |  |  |  |  |  |  | $ | 56.34 |  |  |  | - 27 | % |  | $ | 38.57 |  |  |  |  |  |  | $ | 57.02 |  |  |  | - 32 | %
Realized price, unhedged |  | $ | 37.56 |  |  | 92% |  |  | $ | 54.40 |  |  |  | - 31 | % |  | $ | 34.63 |  |  | 90% |  |  | $ | 54.47 |  |  |  | - 36 | %
Cash settlements |  | $ | 0.65 |  |  |  |  |  |  | $ | 2.18 |  |  |  |  |  |  | $ | 7.06 |  |  |  |  |  |  | $ | 1.80 |  |  |  |  |
Realized price, with hedges |  | $ | 38.21 |  |  | 94% |  |  | $ | 56.58 |  |  |  | - 32 | % |  | $ | 41.69 |  |  | 108% |  |  | $ | 56.27 |  |  |  | - 26 | %
Gas (per Mcf) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Henry Hub index |  | $ | 1.98 |  |  |  |  |  |  | $ | 2.23 |  |  |  | - 11 | % |  | $ | 1.88 |  |  |  |  |  |  | $ | 2.67 |  |  |  | - 30 | %
Realized price, unhedged |  | $ | 1.48 |  |  | 75% |  |  | $ | 1.47 |  |  |  | +0 | % |  | $ | 1.32 |  |  | 70% |  |  | $ | 1.82 |  |  |  | - 27 | %
Cash settlements |  | $ | 0.06 |  |  |  |  |  |  | $ | 0.41 |  |  |  |  |  |  | $ | 0.24 |  |  |  |  |  |  | $ | 0.15 |  |  |  |  |
Realized price, with hedges |  | $ | 1.54 |  |  | 78% |  |  | $ | 1.88 |  |  |  | - 18 | % |  | $ | 1.56 |  |  | 83% |  |  | $ | 1.97 |  |  |  | - 21 | %
NGLs (per Bbl) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mont Belvieu blended index (1) |  | $ | 16.69 |  |  |  |  |  |  | $ | 16.18 |  |  |  | +3 | % |  | $ | 14.55 |  |  |  |  |  |  | $ | 19.39 |  |  |  | - 25 | %
Realized price, unhedged |  | $ | 12.36 |  |  | 74% |  |  | $ | 12.02 |  |  |  | +3 | % |  | $ | 10.66 |  |  | 73% |  |  | $ | 15.02 |  |  |  | - 29 | %
Cash settlements |  | $ | (0.30 | ) |  |  |  |  |  | $ | 2.55 |  |  |  |  |  |  | $ | 0.25 |  |  |  |  |  |  | $ | 1.57 |  |  |  |  |
Realized price, with hedges |  | $ | 12.06 |  |  | 72% |  |  | $ | 14.57 |  |  |  | - 17 | % |  | $ | 10.91 |  |  | 75% |  |  | $ | 16.59 |  |  |  | - 34 | %
Combined (per Boe) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Realized price, unhedged |  | $ | 22.60 |  |  |  |  |  |  | $ | 30.47 |  |  |  | - 26 | % |  | $ | 20.91 |  |  |  |  |  |  | $ | 31.61 |  |  |  | - 34 | %
Cash settlements |  | $ | 0.33 |  |  |  |  |  |  | $ | 2.34 |  |  |  |  |  |  | $ | 3.76 |  |  |  |  |  |  | $ | 1.46 |  |  |  |  |
Total |  | $ | 22.93 |  |  |  |  |  |  | $ | 32.81 |  |  |  | - 30 | % |  | $ | 24.67 |  |  |  |  |  |  | $ | 33.07 |  |  |  | - 25 | %

| (1) | Based upon composition of our NGL barrel.

From the third quarter of 2019 to the third quarter of 2020, field prices contributed to a $222 million decrease in earnings. Unhedged realized oil prices decreased primarily due to lower WTI index prices. Additionally, hedge cash settlements decreased for each product. From the nine months ended 2019 to the nine months ended 2020, field prices contributed to a $1.0 billion decrease in earnings. Unhedged realized oil, gas and NGL prices decreased primarily due to lower WTI, Henry Hub and Mont Belvieu index prices. These decreases were partially offset by favorable hedge cash settlements across each of our products.

Hedge Settlements

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | Change |  |  | 2020 |  |  | 2019 |  |  | Change |
Oil |  | $ | 9 |  |  | $ | 31 |  |  |  | -71 | % |  | $ | 298 |  |  | $ | 71 |  |  |  | 320 | %
Natural gas |  |  | 4 |  |  |  | 22 |  |  |  | -82 | % |  |  | 40 |  |  |  | 24 |  |  |  | 67 | %
NGL |  |  | (3 | ) |  |  | 18 |  |  |  | -117 | % |  |  | 5 |  |  |  | 33 |  |  |  | -85 | %
Total cash settlements (1) |  | $ | 10 |  |  | $ | 71 |  |  |  | -86 | % |  | $ | 343 |  |  | $ | 128 |  |  |  | 168 | %

| (1) | Included as a component of oil, gas and NGL derivatives on the consolidated statements of comprehensive earnings.

Production Expenses

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | Change |  |  | 2020 |  |  | 2019 |  |  | Change |
LOE |  | $ | 100 |  |  | $ | 118 |  |  |  | - 15 | % |  | $ | 334 |  |  | $ | 342 |  |  |  | - 2 | %
Gathering, processing & transportation |  |  | 125 |  |  |  | 112 |  |  |  | +12 | % |  |  | 378 |  |  |  | 332 |  |  |  | +14 | %
Production taxes |  |  | 42 |  |  |  | 58 |  |  |  | - 28 | % |  |  | 123 |  |  |  | 182 |  |  |  | - 33 | %
Property taxes |  |  | 4 |  |  |  | 6 |  |  |  | - 35 | % |  |  | 17 |  |  |  | 17 |  |  |  | +3 | %
Total |  | $ | 271 |  |  | $ | 294 |  |  |  | - 8 | % |  | $ | 852 |  |  | $ | 873 |  |  |  | - 2 | %
Per Boe: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
LOE |  | $ | 3.32 |  |  | $ | 3.90 |  |  |  | - 15 | % |  | $ | 3.66 |  |  | $ | 3.90 |  |  |  | - 6 | %
Gathering, processing & transportation |  | $ | 4.17 |  |  | $ | 3.71 |  |  |  | +13 | % |  | $ | 4.15 |  |  | $ | 3.78 |  |  |  | +10 | %
Percent of oil, gas and NGL sales: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Production taxes |  |  | 6.2 | % |  |  | 6.3 | % |  |  | - 2 | % |  |  | 6.4 | % |  |  | 6.5 | % |  |  | - 2 | %

33

Table of Contents

An increase in gathering, processing and transportation costs from the nine months ended 2019 to the nine months ended 2020 was due to higher volumes and Anadarko minimum volume commitments which are set to expire at the end of 2020. These increases were offset by lower production taxes resulting from lower oil, gas and NGL sales.

Field-Level Cash Margin

The changes in production volumes, field prices and production expenses, shown above, had the following impact on our field-level cash margins by asset.

| Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
| 2020 |  |  | $ per BOE |  |  | 2019 |  |  | $ per BOE |  |  | 2020 |  |  | $ per BOE |  |  | 2019 |  |  | $ per BOE |
Field-Level Cash Margin (non-GAAP) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Delaware Basin | $ | 236 |  |  | $ | 16.52 |  |  | $ | 284 |  |  | $ | 24.42 |  |  | $ | 602 |  |  | $ | 14.16 |  |  | $ | 785 |  |  | $ | 24.42 |
Powder River Basin |  | 47 |  |  | $ | 18.63 |  |  |  | 63 |  |  | $ | 27.12 |  |  |  | 121 |  |  | $ | 16.45 |  |  |  | 173 |  |  | $ | 28.55 |
Eagle Ford |  | 61 |  |  | $ | 14.66 |  |  |  | 100 |  |  | $ | 24.02 |  |  |  | 170 |  |  | $ | 12.54 |  |  |  | 349 |  |  | $ | 26.44 |
Anadarko Basin |  | 56 |  |  | $ | 6.72 |  |  |  | 157 |  |  | $ | 14.08 |  |  |  | 143 |  |  | $ | 5.62 |  |  |  | 537 |  |  | $ | 16.03 |
Other |  | 7 |  |  | $ | 10.10 |  |  |  | 22 |  |  | $ | 23.91 |  |  |  | 21 |  |  | $ | 8.77 |  |  |  | 57 |  |  | $ | 20.05 |
Total | $ | 407 |  |  | $ | 13.59 |  |  | $ | 626 |  |  | $ | 20.73 |  |  | $ | 1,057 |  |  | $ | 11.58 |  |  | $ | 1,901 |  |  | $ | 21.66 |

Due to lower commodity benchmark prices, our unhedged realized price per Boe decreased 34% from the nine months ended 2019 to the nine months ended 2020. These lower realizations have negatively impacted our field-level cash margin and other performance measures.

DD&A and Asset Impairments

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | Change |  |  | 2020 |  |  | 2019 |  |  | Change |
Oil and gas per Boe |  | $ | 9.22 |  |  | $ | 11.70 |  |  |  | - 21 | % |  | $ | 10.19 |  |  | $ | 11.72 |  |  |  | - 13 | %
Oil and gas |  | $ | 276 |  |  | $ | 352 |  |  |  | - 22 | % |  | $ | 929 |  |  | $ | 1,028 |  |  |  | - 10 | %
Other property and equipment |  |  | 23 |  |  |  | 29 |  |  |  | - 19 | % |  |  | 70 |  |  |  | 87 |  |  |  | - 19 | %
Total |  | $ | 299 |  |  | $ | 381 |  |  |  | - 22 | % |  | $ | 999 |  |  | $ | 1,115 |  |  |  | - 10 | %
Asset impairments |  | $ | — |  |  | $ | — |  |  | N/M |  |  | $ | 2,666 |  |  | $ | — |  |  | N/M |

Asset impairments were $2.7 billion in the first nine months of 2020 due to significant decreases in commodity prices since the end of 2019 resulting primarily from the COVID-19 pandemic. For additional information, see Note 5 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

DD&A decreased in the first nine months of 2020 compared to the first nine months of 2019 primarily due to lower rates resulting from impairments recorded in the first quarter of 2020. This was partially offset by higher volumes in 2020.

General and Administrative Expenses

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | Change |  |  | 2020 |  |  | 2019 |  |  | Change |
Labor and benefits (net of reimbursements) |  | $ | 46 |  |  | $ | 67 |  |  |  | - 32 | % |  | $ | 157 |  |  | $ | 227 |  |  |  | - 31 | %
Non-labor |  |  | 29 |  |  |  | 40 |  |  |  | - 29 | % |  |  | 99 |  |  |  | 129 |  |  |  | - 23 | %
Total |  | $ | 75 |  |  | $ | 107 |  |  |  | - 30 | % |  | $ | 256 |  |  | $ | 356 |  |  |  | - 28 | %

Labor and benefits and non-labor expenses decreased primarily as a result of continued workforce reduction and cost savings initiatives. Additional initiatives are underway to decrease annualized G&A expenses by approximately $100 million by the end of 2020.

34

Table of Contents

Other Items

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | Change in earnings |  |  | 2020 |  |  | 2019 |  |  | Change in earnings |
Commodity hedge valuation changes (1) |  | $ | (97 | ) |  | $ | 56 |  |  | $ | (153 | ) |  | $ | (71 | ) |  | $ | (466 | ) |  | $ | 395 |
Marketing and midstream operations |  |  | (2 | ) |  |  | 16 |  |  |  | (18 | ) |  |  | (28 | ) |  |  | 48 |  |  |  | (76 | )
Exploration expenses |  |  | 39 |  |  |  | 18 |  |  |  | (21 | ) |  |  | 163 |  |  |  | 29 |  |  |  | (134 | )
Asset dispositions |  |  | — |  |  |  | (1 | ) |  |  | (1 | ) |  |  | — |  |  |  | (48 | ) |  |  | (48 | )
Net financing costs |  |  | 66 |  |  |  | 60 |  |  |  | (6 | ) |  |  | 200 |  |  |  | 186 |  |  |  | (14 | )
Restructuring and transaction costs |  |  | 32 |  |  |  | 10 |  |  |  | (22 | ) |  |  | 32 |  |  |  | 73 |  |  |  | 41 |
Other expenses |  |  | — |  |  |  | 3 |  |  |  | 3 |  |  |  | (35 | ) |  |  | (12 | ) |  |  | 23 |
|  |  |  |  |  |  |  |  |  | $ | (218 | ) |  |  |  |  |  |  |  |  |  | $ | 187 |

| (1) | Included as a component of oil, gas and NGL derivatives on the consolidated statements of comprehensive earnings.

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

Marketing and midstream operations decreased approximately $76 million for the first nine months ended 2020 compared to the first nine months ended 2019 primarily due to lower commodity prices resulting from the challenged macro-economic environment in 2020, as well as downstream product inventory impairments of $17 million recognized in the first quarter of 2020.

Exploration expenses increased approximately $134 million for the first nine months ended 2020 compared to the first nine months ended 2019 primarily due to $149 million in unproved asset impairments in the first nine months of 2020. For additional information, see Note 5 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Devon recognized $32 million in restructuring and transaction costs in the third quarter of 2020 related to workforce reductions to improve the company’s cost structure and enhance its operational focus. Devon recognized $73 million in restructuring expenses during the first nine months of 2019. For additional information, see Note 6 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

35

Table of Contents

Discontinued Operations

Results of Operations – Discontinued Operations

The table below presents key components from discontinued operations for the time periods presented. Discontinued operations include the Canadian business that Devon sold in June 2019 and the Barnett Shale assets that Devon sold on October 1, 2020. For additional information on discontinued operations, see Note 17 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September 30, |  |  | September 30, |
|  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Oil, gas and NGL sales |  | $ | 94 |  |  | $ | 77 |  |  | $ | 112 |  |  | $ | 263 |  |  | $ | 1,106 |
Oil, gas and NGL derivatives |  | $ | — |  |  | $ | — |  |  | $ | (18 | ) |  | $ | — |  |  | $ | (113 | )
Production expenses |  | $ | 66 |  |  | $ | 74 |  |  | $ | 74 |  |  | $ | 214 |  |  | $ | 525 |
Asset impairments |  | $ | 3 |  |  | $ | — |  |  | $ | — |  |  | $ | 182 |  |  | $ | 37 |
Asset dispositions |  | $ | — |  |  | $ | (2 | ) |  | $ | (35 | ) |  | $ | (2 | ) |  | $ | (222 | )
Financing costs, net |  | $ | (1 | ) |  | $ | (1 | ) |  | $ | 59 |  |  | $ | (3 | ) |  | $ | 85 |
Restructuring and transaction costs |  | $ | — |  |  | $ | — |  |  | $ | 5 |  |  | $ | — |  |  | $ | 244 |
Other expenses |  | $ | 26 |  |  | $ | (3 | ) |  | $ | 8 |  |  | $ | 19 |  |  | $ | 17 |
Earnings (loss) from discontinued operations before income taxes |  | $ | (2 | ) |  | $ | 9 |  |  | $ | (39 | ) |  | $ | (150 | ) |  | $ | 93 |
Income tax benefit |  | $ | (15 | ) |  | $ | — |  |  | $ | (12 | ) |  | $ | (47 | ) |  | $ | (285 | )
Net earnings (loss) from discontinued operations, net of tax |  | $ | 13 |  |  | $ | 9 |  |  | $ | (27 | ) |  | $ | (103 | ) |  | $ | 378 |
Production (MMBoe): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Barnett Shale |  |  | 9 |  |  |  | 9 |  |  |  | 9 |  |  |  | 27 |  |  |  | 27 |
Canada |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 19 |
Total production |  |  | 9 |  |  |  | 9 |  |  |  | 9 |  |  |  | 27 |  |  |  | 46 |
Realized price, unhedged (per Boe) - Barnett Shale |  | $ | 10.94 |  |  | $ | 8.89 |  |  | $ | 12.27 |  |  | $ | 9.89 |  |  | $ | 13.25 |
Realized price, unhedged (per Boe) - Canada |  | N/A |  |  | N/A |  |  | N/A |  |  | N/A |  |  | $ | 38.98 |

Q3 2020 vs. Q2 2020

Net earnings from discontinued operations, net of tax increased $4 million from the second quarter of 2020 to the third quarter of 2020. This was primarily due to higher gas and NGL sales in the third quarter resulting from higher commodity prices, as well as a decrease to Canadian tax liabilities in the third quarter of 2020. These increases in net earnings were partially offset by a $28 million expense recognized in the third quarter of 2020 related to a Barnett Shale royalty matter.

Q3 2020 vs. Q3 2019

Net earnings (loss) from discontinued operations, net of tax increased $40 million from the third quarter of 2019 to the third quarter of 2020. Net earnings increased primarily due to a charge on the early retirement of debt in the third quarter of 2019 as Devon utilized a portion of the sale proceeds from the Canada divestiture to early retire $1.5 billion of senior notes, with no comparable charges in the third quarter of 2020.

September 30, 2020 YTD vs. September 30, 2019 YTD

Net earnings (loss) from discontinued operations, net of tax decreased $481 million for the first nine months ended September 30, 2020 compared to the first nine months ended September 30, 2019. Net earnings decreased primarily due to the divestment of Devon’s Canadian operations during the second quarter of 2019, as well as lower revenues resulting from the challenged macro-economic environment in 2020. Additionally, 2020 includes $182 million in incremental asset impairments to our Barnett Shale assets primarily related to the amended terms of the Barnett Shale sales agreement.

36

Table of Contents

Capital Resources, Uses and Liquidity

Sources and Uses of Cash

The following table presents the major changes in cash and cash equivalents for the three and nine months ended September 30, 2020 and 2019.

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Operating cash flow from continuing operations |  | $ | 427 |  |  | $ | 595 |  |  | $ | 1,106 |  |  | $ | 1,464 |
Divestitures of property and equipment |  |  | 1 |  |  |  | 9 |  |  |  | 29 |  |  |  | 347 |
Capital expenditures |  |  | (204 | ) |  |  | (526 | ) |  |  | (936 | ) |  |  | (1,502 | )
Acquisitions of property and equipment |  |  | — |  |  |  | (5 | ) |  |  | (5 | ) |  |  | (28 | )
Debt activity, net |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (162 | )
Repurchases of common stock |  |  | — |  |  |  | (561 | ) |  |  | (38 | ) |  |  | (1,746 | )
Common stock dividends |  |  | (43 | ) |  |  | (35 | ) |  |  | (119 | ) |  |  | (106 | )
Contributions from noncontrolling interests |  |  | 1 |  |  |  | — |  |  |  | 12 |  |  |  | — |
Distributions to noncontrolling interests |  |  | (4 | ) |  |  | — |  |  |  | (10 | ) |  |  | — |
Other |  |  | — |  |  |  | (1 | ) |  |  | (17 | ) |  |  | (23 | )
Net change in cash, cash equivalents and restricted cash from discontinued operations |  |  | 50 |  |  |  | (1,673 | ) |  |  | 31 |  |  |  | 966 |
Net change in cash, cash equivalents and restricted cash |  | $ | 228 |  |  | $ | (2,197 | ) |  | $ | 53 |  |  | $ | (790 | )
Cash, cash equivalents and restricted cash at end of period |  | $ | 1,897 |  |  | $ | 1,656 |  |  | $ | 1,897 |  |  | $ | 1,656 |

Operating Cash Flow

Despite our portfolio enhancements, aggressive cost reductions and operational advancements, our financial results continue to be challenged by commodity prices and deterioration of the macro-economic environment resulting from the unprecedented COVID-19 pandemic. 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 funded all our capital expenditures and dividends during the three months and nine months ended September 30, 2020.

Divestitures of Property and Equipment

During the first nine months of 2019, we sold non-core U.S. assets for approximately $347 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.

Capital Expenditures and Acquisitions of Property and Equipment

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 September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Delaware Basin |  | $ | 147 |  |  | $ | 263 |  |  | $ | 560 |  |  | $ | 733 |
Powder River Basin |  |  | 24 |  |  |  | 98 |  |  |  | 155 |  |  |  | 214 |
Eagle Ford |  |  | 17 |  |  |  | 39 |  |  |  | 153 |  |  |  | 147 |
Anadarko Basin |  |  | 2 |  |  |  | 88 |  |  |  | 20 |  |  |  | 325 |
Other |  |  | 3 |  |  |  | 7 |  |  |  | 9 |  |  |  | 26 |
Total oil and gas |  |  | 193 |  |  |  | 495 |  |  |  | 897 |  |  |  | 1,445 |
Midstream |  |  | 7 |  |  |  | 27 |  |  |  | 26 |  |  |  | 38 |
Other |  |  | 4 |  |  |  | 4 |  |  |  | 13 |  |  |  | 19 |
Total capital expenditures |  | $ | 204 |  |  | $ | 526 |  |  | $ | 936 |  |  | $ | 1,502 |
Acquisitions |  | $ | — |  |  | $ | 5 |  |  | $ | 5 |  |  | $ | 28 |

Capital expenditures consist primarily of amounts related to our oil and gas exploration and development operations, midstream operations and other corporate activities. Our capital program is designed to operate within or near operating cash flow. This is

37

Table of Contents

evidenced by our operating cash flow funding all of our capital expenditures for the three months and nine months ended September 30, 2020. Our capital investment program is driven by a disciplined allocation process focused on returns. Our capital expenditures are lower in 2020 primarily due to decreased spending across the majority of our assets. In response to the current macro-economic environment, we reduced our 2020 capital expenditures outlook by approximately $800 million, or 45% compared to the original capital budget.

Debt Activity

During the first nine months of 2019, our debt decreased $162 million due to the repayment of our 6.30% senior notes at maturity.

Shareholder Distributions and Stock Activity

The following table summarizes our common stock dividends during the first nine months of 2020 and 2019. Beginning with the second quarter of 2020, we increased our quarterly dividend 22%, to $0.11 per share. We previously increased our quarterly dividend to $0.09 per share commencing with the second quarter of 2019.

| Amounts |  |  | Rate Per Share |
Quarter Ended 2020: |  |  |  |  |  |  |
First quarter | $ | 34 |  |  | $ | 0.09 |
Second quarter |  | 42 |  |  | $ | 0.11 |
Third quarter |  | 43 |  |  | $ | 0.11 |
Total year-to-date | $ | 119 |  |  |  |  |
Quarter Ended 2019: |  |  |  |  |  |  |
First quarter | $ | 34 |  |  | $ | 0.08 |
Second quarter |  | 37 |  |  | $ | 0.09 |
Third quarter |  | 35 |  |  | $ | 0.09 |
Total year-to-date | $ | 106 |  |  |  |  |

We repurchased 2.2 million shares of common stock for $38 million in the first nine months of 2020 and 64.2 million shares of common stock for $1.7 billion in the first nine months of 2019 under share repurchase programs authorized by our Board of Directors. For additional information, see Note 16 in “Part I. Financial Information – Item 1. Financial Statements” in this report.

Noncontrolling Interest Contributions and Distributions

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.

38

Table of Contents

Cash Flows from Discontinued Operations

All cash flows in the following table relate to activities of our Canadian business that Devon sold in June 2019 and the Barnett Shale assets that Devon sold on October 1, 2020.

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Canadian tax payments |  | $ | — |  |  | $ | — |  |  | $ | (173 | ) |  | $ | — |
Settlements of intercompany foreign denominated assets/liabilities |  |  | — |  |  |  | (1 | ) |  |  | — |  |  |  | (32 | )
Other |  |  | 45 |  |  |  | (93 | ) |  |  | 44 |  |  |  | 69 |
Operating activities |  |  | 45 |  |  |  | (94 | ) |  |  | (129 | ) |  |  | 37 |
Divestitures of property and equipment - Canadian operations |  |  | 2 |  |  |  | 7 |  |  |  | 2 |  |  |  | 2,608 |
Divestitures of property and equipment - Barnett Shale assets |  |  | — |  |  |  | (1 | ) |  |  | 170 |  |  |  | — |
Capital expenditures and other |  |  | (1 | ) |  |  | (11 | ) |  |  | (1 | ) |  |  | (136 | )
Investing activities |  |  | 1 |  |  |  | (5 | ) |  |  | 171 |  |  |  | 2,472 |
Debt activity, net |  |  | — |  |  |  | (1,552 | ) |  |  | — |  |  |  | (1,552 | )
Other |  |  | — |  |  |  | (19 | ) |  |  | — |  |  |  | (27 | )
Financing activities |  |  | — |  |  |  | (1,571 | ) |  |  | — |  |  |  | (1,579 | )
Settlements of intercompany foreign denominated assets/liabilities |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | 32 |
Other |  |  | 4 |  |  |  | (4 | ) |  |  | (11 | ) |  |  | 4 |
Effect of exchange rate changes on cash |  |  | 4 |  |  |  | (3 | ) |  |  | (11 | ) |  |  | 36 |
Net change in cash, cash equivalents and restricted cash of discontinued operations |  | $ | 50 |  |  | $ | (1,673 | ) |  | $ | 31 |  |  | $ | 966 |

Operating cash flows during the first nine months of 2020 include $173 million of cash income and withholding tax payments in Canada related to divestitures and was also negatively impacted by lower commodity prices. Foreign currency denominated intercompany loan activity resulted in a realized loss of $32 million during the first nine months of 2019 as a result of the strengthening of the U.S. dollar in relation to the Canadian dollar. There was an offset in the effect of exchange rate changes on cash line in the table above, resulting in no impact to the net change in cash, cash equivalents and restricted cash. Investing cash flows during the first nine months of 2020 include $170 million in deposit funds from BKV due to the amended terms on the sale of our Barnett Shale assets. On June 27, 2019, we completed the sale of our Canadian business for proceeds of $2.6 billion. See Note 2 and Note 17 in “Part I. Financial Information – Item 1. Financial Statements” in this report for additional details on these divestitures.

Liquidity

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

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 capital requirements as discussed in this section.

Beginning in the first quarter of 2020, the macro-economic environment deteriorated significantly and has created extreme volatility primarily due to concerns arising from the COVID-19 pandemic. In response to this environment, we will continue to maintain flexibility within our capital program as we continue to focus on protecting our financial strength and maintaining operational continuity. Additionally, we have initiatives underway to reduce annualized production, administrative and financing expenses by a total of $300 million.

39

Table of Contents

Operating Cash Flow

Key inputs into determining our planned capital investment are the amounts 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 third quarter of 2020, we held approximately $1.9 billion of cash, inclusive of $190 million of cash restricted for discontinued operations. Our operating cash flow forecasts are sensitive to many variables and include a measure of uncertainty as the actual results of 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 substantially 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. We currently have approximately 30% of our 2021 oil production hedged with an average floor price of $38/Bbl and approximately 33% of our 2021 gas production hedged with an average floor price of $2.45/Mcf. We are continuing to build our 2021 and 2022 hedge positions at market prices. The key terms to our oil, gas and NGL derivative financial instruments as of September 30, 2020 are presented in Note 3 in “Part I. Financial Information – Item 1. Financial Statements” of this report.

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.

Driven by lower realized prices, margins and capital investment, we have begun initiatives to reduce our annualized production and administrative expenses a total of $225 million. We expect these annualized savings to be sustainable as we tailor our workforce and operations for current activity levels.

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 and other protections allowed per our agreements.

Divestitures of Property and Equipment and Special Dividend

We closed on our Barnett Shale divestiture on October 1, 2020, receiving proceeds of approximately $490 million, net of purchase price adjustments, including a $170 million deposit received in the second quarter of 2020.

Our Board of Directors approved a $0.26 per share special dividend for approximately $100 million in the aggregate that was paid on October 1, 2020.

Capital Expenditures

In response to the current macro-economic environment, we reduced our 2020 capital expenditures outlook by approximately $800 million, or 45% compared to the original capital budget. Our exploration and development budget for the fourth quarter of 2020 is expected to range from $160 million to $200 million. As economic factors change, we will continue to be flexible with our capital program.

Debt Repurchases

Our Board of Directors has authorized a $1.5 billion debt repurchase program. Repurchases will be dependent on market conditions and may be made through open market purchases, tender offers or other transaction structures. The repurchases are expected to generate $75 million of annualized financing cost savings.

40

Table of Contents

Credit Availability

As of September 30, 2020, 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 September 30, 2020, there were no borrowings under our commercial paper program, and we were in compliance with the Senior Credit Facility’s financial covenant.

Debt Ratings

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

Strategic Merger of Equals

On September 26, 2020, Devon and WPX entered into the Merger Agreement to combine in an all-stock merger of equals transaction expected to close in the first quarter of 2021. The strategic combination accelerates our transition to a cash-return business model, which moderates growth, emphasizes capital efficiencies and prioritizes cash to shareholders. Effective upon the closing of the Merger, Devon intends to implement a fixed plus variable dividend strategy. In addition to maintaining its fixed quarterly dividend, the future variable dividends could be up to 50% of excess quarterly free cash flow, subject to certain criteria being met. Excess free cash flow for purposes of computing the variable dividend is based on the net cash from operating activities less capital expenditures and the fixed quarterly cash dividend. The Merger is also expected to create value from operational and corporate synergies and reduced financing costs.

Critical Accounting Estimates

Income Taxes

The amount of income taxes recorded requires interpretations of complex rules and regulations of federal, state, provincial and foreign tax jurisdictions. We recognize current tax expense based on estimated taxable income for the current period and the applicable statutory tax rates. We routinely assess potential uncertain tax positions and, if required, estimate and establish accruals for such amounts. We have recognized deferred tax assets and liabilities for temporary differences, operating losses and other tax carryforwards. We routinely assess our deferred tax assets and reduce such assets by a valuation allowance if we deem it is more likely than not that some portion or all of the deferred tax assets will not be realized. Due to an unprecedented downturn in the commodity price environment and the resulting asset impairments, Devon had significant deferred tax assets at March 31, 2020. Accordingly, we reassessed the realizability of our deferred tax assets in future periods and recorded a 100% valuation allowance against our net deferred tax assets during the first quarter of 2020. As of September 30, 2020, we remain in a full valuation allowance position.

Valuation of Long-Lived Assets

Long-lived assets used in operations, including proved and unproved oil and gas properties, are depreciated and assessed for impairment annually or whenever changes in facts and circumstances indicate a possible significant deterioration in future cash flows is expected to be generated by an asset group. For DD&A calculations and impairment assessments, management groups individual assets based on a judgmental assessment of the lowest level (“common operating field”) for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets.

Management evaluates assets for impairment through an established process in which changes to significant assumptions such as prices, volumes and future development plans are reviewed. If, upon review, the sum of the undiscounted pre-tax cash flows is less than the carrying value of the asset group, the carrying value is written down to estimated fair value. Because there usually is a lack of quoted market prices for long-lived assets, the fair value of impaired assets is typically determined based on the present values of expected future cash flows using discount rates believed to be consistent with those used by principal market participants. The expected future cash flows used for impairment reviews and related fair value calculations are typically based on judgmental assessments of future production volumes, commodity prices, operating costs and capital investment plans, considering all available information at the date of review. The expected future cash flows used for impairment reviews include future production volumes associated with proved producing and risk-adjusted proved undeveloped, probable and possible reserves.

41

Table of Contents

Besides the risk-adjusted estimates of reserves and future production volumes, future commodity prices are the largest driver in the variability of undiscounted pre-tax cash flows. For our impairment determinations, we historically have utilized NYMEX forward strip prices for the first five years and applied internally generated price forecasts for subsequent years. In response to the COVID-19 pandemic, the NYMEX forward market became highly illiquid as evidenced by materially reduced trading volumes for periods beyond 2021. Therefore, we altered our price forecast assumptions to perform our March 31, 2020 impairment computations. Specifically, we supplemented the NYMEX forward strip prices with price forecasts published by reputable investment banks and reservoir engineering firms to estimate our future revenues as of March 31, 2020.

We also estimate and escalate or de-escalate future capital and operating costs by using a method that correlates cost movements to price movements similar to recent history. To measure indicated impairments, we use a market-based weighted-average cost of capital to discount the future net cash flows. Changes to any of the reserves or market-based assumptions can significantly affect estimates of undiscounted and discounted pre-tax cash flows and impact the recognition and amount of impairments.

Reduced demand from the COVID-19 pandemic and management of production levels from OPEC caused WTI pricing to decrease more than 60% during the first quarter of 2020. As a result, we reduced our planned 2020 capital investment 45%. With materially lower commodity prices and reduced near-term investment, we assessed all our oil and gas fields for impairment as of March 31, 2020 and recognized proved and unproved impairments totaling $2.8 billion. The impairments relate to our Anadarko Basin and Rockies fields in which our basis included acquisitions completed in 2016 and 2015, respectively, when commodity prices were much higher than they are today.

We assessed our Eagle Ford asset for impairment as of June 30, 2020 and September 30, 2020 utilizing the same methodology we applied for the impairment assessments for all of our and oil and gas fields in the first quarter of 2020. Our Eagle Ford asset’s sum of undiscounted cash flows exceeded the carrying value indicating no impairment as of September 30, 2020. Further, as a result of improved oil pricing, the cushion increased significantly from March 31, 2020 to September 30, 2020. If prices significantly deteriorate and/or management lowers the planned capital investment in the Eagle Ford field, our Eagle Ford asset could be subject to a material impairment of capitalized costs.

Goodwill

We test goodwill for impairment annually at October 31, or more frequently if events or changes in circumstances dictate that the carrying value of goodwill may not be recoverable. We perform a qualitative assessment to determine whether it is more likely than not that the fair value of goodwill is less than its carrying amount. As part of our qualitative assessment, we considered the general macro-economic, industry and market conditions, changes in cost factors, actual and expected financial performance, significant changes in management, strategy or customers and stock performance. If the qualitative assessment determines that a quantitative goodwill impairment test is required, then the fair value is compared to the carrying value. If the fair value is less than the carrying value, an impairment charge will be recognized for the amount by which the carrying amount exceeds the fair value. Because quoted market prices are not available, the fair value is estimated based upon a valuation analyses including comparable companies and transactions and premiums paid.

Because the trading price of our common stock decreased 73% during the first quarter of 2020 in response to the COVID-19 pandemic, we performed a goodwill impairment test as of March 31, 2020. While the cushion narrowed significantly since our last impairment evaluation, we concluded an impairment was not required as of March 31, 2020. The two most critical judgements included in the March 31, 2020, test were the period utilized to determine Devon’s market capitalization and the control premium. For the test performed as of March 31, 2020 we derived our market capitalization by using our average common stock price from the latter two thirds of March 2020, to align with the time in the quarter subsequent to a key OPEC+ meeting and the date COVID-19 was officially classified as a pandemic. We applied a control premium based on recent comparable market transactions.

Subsequent to the end of the first quarter of 2020, Devon’s common stock price increased approximately 37% during the second and third quarter but remains significantly less than our average trading price before the events experienced in the first quarter of 2020. Although our common stock price and commodity prices are in a period of high volatility, a sustained period of depressed commodity prices would adversely affect our estimates of future operating results, which could result in future goodwill impairments due to the potential impact on the cash flows of our operations. The impairment of goodwill has no effect on liquidity or capital resources. However, it would adversely affect our results of operations in the period recognized.

For additional information regarding our critical accounting policies and estimates, see our 2019 Annual Report on Form 10-K.

42

Table of Contents

Non-GAAP Measures

We make reference to “core earnings (loss) attributable to Devon” and “core earnings (loss) per share attributable to Devon” in “Overview of 2020 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 noncash and other items that are typically excluded by securities analysts in their published estimates of our financial results. For more information on the results of discontinued operations for our Barnett Shale asset and Canadian operations, see Note 17 in “Part I. Financial Information – Item 1. Financial Statements” in this report. Our non-GAAP measures are typically used as a quarterly performance measure. Amounts excluded relate to asset dispositions, noncash asset impairments (including noncash unproved asset impairments), deferred tax asset valuation allowance, costs associated with early retirement of debt, fair value changes in derivative financial instruments and foreign currency, 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.

43

Table of Contents

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

| 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 |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Continuing Operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss attributable to Devon (GAAP) | $ | (193 | ) |  | $ | (103 | ) |  | $ | (105 | ) |  | $ | (0.29 | ) |  | $ | (2,980 | ) |  | $ | (2,470 | ) |  | $ | (2,475 | ) |  | $ | (6.58 | )
Adjustments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset and exploration impairments |  | 36 |  |  |  | 29 |  |  |  | 29 |  |  |  | 0.08 |  |  |  | 2,816 |  |  |  | 2,178 |  |  |  | 2,178 |  |  |  | 5.80 |
Deferred tax asset valuation allowance |  | — |  |  |  | (5 | ) |  |  | (5 | ) |  |  | (0.01 | ) |  |  | — |  |  |  | 252 |  |  |  | 252 |  |  |  | 0.65 |
Fair value changes in financial instruments |  | 97 |  |  |  | 74 |  |  |  | 74 |  |  |  | 0.19 |  |  |  | 71 |  |  |  | 55 |  |  |  | 55 |  |  |  | 0.14 |
Change in tax legislation |  | — |  |  |  | (43 | ) |  |  | (43 | ) |  |  | (0.11 | ) |  |  | — |  |  |  | (105 | ) |  |  | (105 | ) |  |  | (0.27 | )
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 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
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 |  | 3 |  |  |  | 3 |  |  |  | 3 |  |  |  | 0.00 |  |  |  | 182 |  |  |  | 143 |  |  |  | 143 |  |  |  | 0.37 |
Fair value changes in foreign currency and other |  | (2 | ) |  |  | (3 | ) |  |  | (3 | ) |  |  | (0.01 | ) |  |  | 4 |  |  |  | 2 |  |  |  | 2 |  |  |  | 0.01 |
Core earnings (loss) attributable to Devon (Non-GAAP) | $ | (1 | ) |  | $ | 13 |  |  | $ | 13 |  |  | $ | 0.03 |  |  | $ | 34 |  |  | $ | 41 |  |  | $ | 41 |  |  | $ | 0.11 |
Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss attributable to Devon (GAAP) | $ | (195 | ) |  | $ | (90 | ) |  | $ | (92 | ) |  | $ | (0.25 | ) |  | $ | (3,130 | ) |  | $ | (2,573 | ) |  | $ | (2,578 | ) |  | $ | (6.85 | )
Adjustments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Continuing Operations |  | 165 |  |  |  | 80 |  |  |  | 80 |  |  |  | 0.22 |  |  |  | 2,919 |  |  |  | 2,405 |  |  |  | 2,405 |  |  |  | 6.38 |
Discontinued Operations |  | 1 |  |  |  | — |  |  |  | — |  |  |  | (0.01 | ) |  |  | 184 |  |  |  | 144 |  |  |  | 144 |  |  |  | 0.38 |
Core loss attributable to Devon (Non-GAAP) | $ | (29 | ) |  | $ | (10 | ) |  | $ | (12 | ) |  | $ | (0.04 | ) |  | $ | (27 | ) |  | $ | (24 | ) |  | $ | (29 | ) |  | $ | (0.09 | )
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Continuing Operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earnings (loss) attributable to Devon (GAAP) | $ | 190 |  |  | $ | 136 |  |  | $ | 136 |  |  | $ | 0.34 |  |  | $ | (88 | ) |  | $ | (91 | ) |  | $ | (91 | ) |  | $ | (0.22 | )
Adjustments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset dispositions |  | (1 | ) |  |  | (1 | ) |  |  | (1 | ) |  |  | (0.00 | ) |  |  | (48 | ) |  |  | (37 | ) |  |  | (37 | ) |  |  | (0.09 | )
Asset and exploration impairments |  | 14 |  |  |  | 11 |  |  |  | 11 |  |  |  | 0.03 |  |  |  | 16 |  |  |  | 13 |  |  |  | 13 |  |  |  | 0.03 |
Deferred tax asset valuation allowance |  | — |  |  |  | 4 |  |  |  | 4 |  |  |  | 0.01 |  |  |  | — |  |  |  | 2 |  |  |  | 2 |  |  |  | 0.00 |
Fair value changes in financial instruments |  | (57 | ) |  |  | (44 | ) |  |  | (44 | ) |  |  | (0.11 | ) |  |  | 465 |  |  |  | 358 |  |  |  | 358 |  |  |  | 0.86 |
Restructuring and transaction costs |  | 10 |  |  |  | 8 |  |  |  | 8 |  |  |  | 0.02 |  |  |  | 73 |  |  |  | 57 |  |  |  | 57 |  |  |  | 0.14 |
Core earnings attributable to Devon (Non-GAAP) | $ | 156 |  |  | $ | 114 |  |  | $ | 114 |  |  | $ | 0.29 |  |  | $ | 418 |  |  | $ | 302 |  |  | $ | 302 |  |  | $ | 0.72 |
Discontinued Operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earnings (loss) attributable to Devon (GAAP) | $ | (39 | ) |  | $ | (27 | ) |  | $ | (27 | ) |  | $ | (0.07 | ) |  | $ | 93 |  |  | $ | 378 |  |  | $ | 378 |  |  | $ | 0.91 |
Adjustments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset dispositions |  | (35 | ) |  |  | (20 | ) |  |  | (20 | ) |  |  | (0.05 | ) |  |  | (222 | ) |  |  | (479 | ) |  |  | (479 | ) |  |  | (1.16 | )
Asset and exploration impairments |  | — |  |  |  | — |  |  |  | — |  |  |  | 0.00 |  |  |  | 37 |  |  |  | 27 |  |  |  | 27 |  |  |  | 0.07 |
Deferred tax asset valuation allowance |  | — |  |  |  | (4 | ) |  |  | (4 | ) |  |  | (0.01 | ) |  |  | — |  |  |  | 23 |  |  |  | 23 |  |  |  | 0.05 |
Early retirement of debt |  | 58 |  |  |  | 45 |  |  |  | 45 |  |  |  | 0.11 |  |  |  | 58 |  |  |  | 45 |  |  |  | 45 |  |  |  | 0.11 |
Fair value changes in financial instruments and foreign currency and other |  | (6 | ) |  |  | (9 | ) |  |  | (9 | ) |  |  | (0.02 | ) |  |  | (29 | ) |  |  | (32 | ) |  |  | (32 | ) |  |  | (0.08 | )
Restructuring and transaction costs |  | 5 |  |  |  | 4 |  |  |  | 4 |  |  |  | 0.01 |  |  |  | 244 |  |  |  | 178 |  |  |  | 178 |  |  |  | 0.44 |
Core earnings (loss) attributable to Devon (Non-GAAP) | $ | (17 | ) |  | $ | (11 | ) |  | $ | (11 | ) |  | $ | (0.03 | ) |  | $ | 181 |  |  | $ | 140 |  |  | $ | 140 |  |  | $ | 0.34 |
Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earnings attributable to Devon (GAAP) | $ | 151 |  |  | $ | 109 |  |  | $ | 109 |  |  | $ | 0.27 |  |  | $ | 5 |  |  | $ | 287 |  |  | $ | 287 |  |  | $ | 0.69 |
Adjustments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Continuing Operations |  | (34 | ) |  |  | (22 | ) |  |  | (22 | ) |  |  | (0.05 | ) |  |  | 506 |  |  |  | 393 |  |  |  | 393 |  |  |  | 0.94 |
Discontinued Operations |  | 22 |  |  |  | 16 |  |  |  | 16 |  |  |  | 0.04 |  |  |  | 88 |  |  |  | (238 | ) |  |  | (238 | ) |  |  | (0.57 | )
Core earnings attributable to Devon (Non-GAAP) | $ | 139 |  |  | $ | 103 |  |  | $ | 103 |  |  | $ | 0.26 |  |  | $ | 599 |  |  | $ | 442 |  |  | $ | 442 |  |  | $ | 1.06 |

44

Table of Contents

EBITDAX and Field-Level Cash Margin

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

We exclude financing costs from EBITDAX to assess our operating results without regard to our financing methods or capital structure. Exploration expenses and asset disposition gains and losses are excluded from EBITDAX because they generally are not indicators of operating efficiency for a given reporting period. DD&A and impairments are excluded from EBITDAX because capital expenditures are evaluated at the time capital costs are incurred. We exclude share-based compensation, valuation changes, restructuring and transaction costs, accretion on discounted liabilities and other items from EBITDAX because they are not considered a measure of asset operating performance.

We believe EBITDAX and Field-Level Cash Margin provide information useful in assessing our operating and financial performance across periods. EBITDAX and Field-Level Cash Margin as defined by Devon may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with net earnings from continuing operations.

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

| Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
| 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net earnings (loss) (GAAP) | $ | (90 | ) |  | $ | 109 |  |  | $ | (2,573 | ) |  | $ | 287 |
Net (earnings) loss from discontinued operations, net of tax |  | (13 | ) |  |  | 27 |  |  |  | 103 |  |  |  | (378 | )
Financing costs, net |  | 66 |  |  |  | 60 |  |  |  | 200 |  |  |  | 186 |
Income tax expense (benefit) |  | (90 | ) |  |  | 54 |  |  |  | (510 | ) |  |  | 3 |
Exploration expenses |  | 39 |  |  |  | 18 |  |  |  | 163 |  |  |  | 29 |
Depreciation, depletion and amortization |  | 299 |  |  |  | 381 |  |  |  | 999 |  |  |  | 1,115 |
Asset impairments |  | — |  |  |  | — |  |  |  | 2,666 |  |  |  | — |
Asset dispositions |  | — |  |  |  | (1 | ) |  |  | — |  |  |  | (48 | )
Share-based compensation |  | 19 |  |  |  | 20 |  |  |  | 58 |  |  |  | 64 |
Derivative and financial instrument non-cash valuation changes |  | 97 |  |  |  | (57 | ) |  |  | 71 |  |  |  | 464 |
Restructuring and transaction costs |  | 32 |  |  |  | 10 |  |  |  | 32 |  |  |  | 73 |
Accretion on discounted liabilities and other |  | — |  |  |  | 5 |  |  |  | (35 | ) |  |  | (10 | )
EBITDAX (non-GAAP) |  | 359 |  |  |  | 626 |  |  |  | 1,174 |  |  |  | 1,785 |
Marketing and midstream revenues and expenses, net |  | 2 |  |  |  | (16 | ) |  |  | 28 |  |  |  | (48 | )
Commodity derivative cash settlements |  | (10 | ) |  |  | (71 | ) |  |  | (343 | ) |  |  | (128 | )
General and administrative expenses, cash-based |  | 56 |  |  |  | 87 |  |  |  | 198 |  |  |  | 292 |
Field-level cash margin (non-GAAP) | $ | 407 |  |  | $ | 626 |  |  | $ | 1,057 |  |  | $ | 1,901 |

45

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Commodity Price Risk

As of September 30, 2020, we have commodity derivatives that pertain to a portion of our estimated production for the last three months of 2020, as well as for 2021 and 2022. 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 September 30, 2020, a 10% change in the forward curves associated with our commodity derivative instruments would have changed our net positions by approximately $131 million.

Interest Rate Risk

As of September 30, 2020, we had total debt of $4.3 billion. All of our debt is based on fixed interest rates averaging 6.0%.

Foreign Currency Risk

We had no material foreign currency risk at September 30, 2020.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

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

Based on their evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of September 30, 2020 to ensure that the information required to be disclosed by Devon in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.

Changes in Internal Control Over Financial Reporting

There were no 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.

46

Table of Contents

PART II. Other Information

Item 1. Legal Proceedings

We are involved in various legal proceedings incidental to our business. However, to our knowledge as of the date of this report, there were no material pending legal proceedings to which we are a party or to which any of our property is subject.

Please see our 2019 Annual Report on Form 10-K and other SEC filings for additional information.

Item 1A. Risk Factors

Except for the addition of the risks related to the Merger discussed below and the pandemic risk factor discussed in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, there have been no material changes to the information included in Item 1A. “Risk Factors” in our 2019 Annual Report on Form 10-K.

Risks Relating to the Merger

We may fail to realize the anticipated benefits of the Merger, and any failure to successfully integrate the businesses and operations of Devon and WPX may adversely affect our future results.

The success of the Merger will depend on, among other things, the combined company’s ability to combine the Devon and WPX businesses in a manner that realizes anticipated synergies and benefits. If the combined company is not able to successfully achieve these synergies, or the cost to achieve these synergies is greater than expected, then the anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected.

We and WPX have operated and, until the completion of the Merger, will continue to operate independently. There can be no assurances that our businesses can be integrated successfully. It is possible that the integration process could result in the loss of key Devon employees or key WPX employees, the loss of customers, the disruption of our or WPX’s ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post‑completion integration process that takes longer than originally anticipated. Furthermore, the combined company’s board of directors and management team will consist of directors and employees from each of Devon and WPX, as applicable. Combining the boards of directors and management teams of each company into a single board and a single management team could require the reconciliation of differing priorities and strategic philosophies, which may not be successful or take longer than anticipated.

We are subject to certain restrictions in the Merger Agreement that may hinder operations pending the consummation of the Merger, and we may be the target of securities class action and derivative lawsuits as a result of the Merger.

Whether or not the Merger is completed, the pending Merger may disrupt our current plans and operations, which could have an adverse effect on our business operations and financial results. During the pendency of the Merger, the Merger Agreement generally requires us to operate our business in all material respects in the ordinary course and not to engage in specified types of actions during this period, in each case subject to certain exceptions. These restrictions could be in place for an extended period of time if the consummation of the Merger is delayed, which may delay or prevent us from undertaking business opportunities that, absent the Merger Agreement, we might have pursued, or effectively respond to competitive pressures or industry developments.

In addition, litigation is common in connection with mergers and acquisitions of public companies, regardless of any merits related to the claims. Defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages. Moreover, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Merger, the injunction may delay or prevent the Merger from being completed, which may adversely affect our business, results of operations and financial condition.

The Merger Agreement could be terminated, which could negatively impact us.

The Merger is subject to a number of conditions that must be satisfied or waived (to the extent permissible) prior to the completion of the Merger. These conditions to the completion of the Merger, some of which are beyond our control, may not be satisfied or waived in a timely manner or at all, and, accordingly, the Merger may be delayed or not completed. The Merger Agreement also contains certain termination rights for both Devon and WPX, including if the Merger is not consummated by March 26, 2021, and further provides that, upon termination of the Merger Agreement under certain circumstances, we may be required to pay WPX a termination fee equal to $75 million.

If the Merger is not completed, our ongoing business may be adversely affected and, without realizing any of the benefits of having completed the Merger, we may experience certain negative effects, including the following: (i) may experience negative

47

Table of Contents

reactions from the financial markets and business partners; (ii) we will still be required to pay certain significant costs relating to the Merger, such as legal, accounting and other advisory fees and printing costs; and (iii) matters relating to the Merger (including integration planning) require substantial commitments of time and resources by our management, which may result in the distraction of our management from ongoing business operations and pursuing other opportunities that could have been beneficial to us.

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

The following table provides information regarding purchases of our common stock that were made by us during the third quarter of 2020 (shares in thousands).

Period |  | Total Number of Shares Purchased (1) |  |  | Average Price Paid per Share |  |  | Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs (2) |  |  | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) |
July 1 - July 31 |  |  | 5 |  |  | $ | 10.80 |  |  |  | — |  |  | $ | 962 |
August 1 - August 31 |  |  | 1 |  |  | $ | 12.64 |  |  |  | — |  |  | $ | 962 |
September 1 - September 30 |  |  | 66 |  |  | $ | 9.43 |  |  |  | — |  |  | $ | 962 |
Total |  |  | 72 |  |  | $ | 9.58 |  |  |  | — |  |  |  |  |

| (1) | These amounts reflect the shares received by us from employees for the payment of personal income tax withholding on vesting transactions.

| (2) | On December 17, 2019, we announced a $1.0 billion share repurchase program that has a December 31, 2020 expiration date. As of September 30, 2020, we had repurchased 2.2 million common shares for $38 million, or $16.85 per share, under our share repurchase program. Devon has temporarily suspended its share repurchase program. If Devon were to resume share repurchases under the program, such repurchases may be made in open-market or private transactions. For additional information, see Note 16 in “Part I. Financial Information – Item 1. Financial Statements” of this report.

Under the Devon Plan, eligible employees made purchases of shares of our common stock through an investment in the Devon Stock Fund, which is administered by an independent trustee. Eligible employees purchased approximately 4,500 shares of our common stock in the third quarter of 2020, at then-prevailing stock prices, that they held through their ownership in the Stock Fund. We acquired the shares of our common stock sold under the Devon Plan through open-market purchases.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

48

Table of Contents

Item 6. E xhibits

Exhibit Number |  | Description
2.1 | Agreement and Plan of Merger, dated as of September 26, 2020, by and among Devon Energy Corporation, East Merger Sub, Inc. and WPX Energy, Inc. (incorporated by reference to Exhibit 2.1 to Registrant’s Form 8-K filed September 28, 2020; File No. 001-32318).
10.1 | Support Agreement, dated as of September 26, 2020, by and among Devon Energy Corporation and certain affiliates of EnCap Investments L.P. (incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed September 28, 2020; File No. 001-32318).
10.2* | Employment Letter Agreement, dated as of September 26, 2020, by and between Devon Energy Corporation and David A. Hager (incorporated by reference to Exhibit 10.2 to Registrant’s Form 8-K filed September 28, 2020; File No. 001-32318).
10.3* | Employment Letter Agreement, dated as of September 26, 2020, by and between Devon Energy Corporation and Richard E. Muncrief (incorporated by reference to Exhibit 10.3 to Registrant’s Form 8-K filed September 28, 2020; File No. 001-32318).
10.4* | Employment Letter Agreement, dated as of September 26, 2020, by and between Devon Energy Corporation and Clay M. Gaspar (incorporated by reference to Exhibit 10.4 to Registrant’s Form 8-K filed September 28, 2020; File No. 001-32318).
10.5* | Employment Letter Agreement, dated as of September 26, 2020, by and between Devon Energy Corporation and Dennis C. Cameron (incorporated by reference to Exhibit 10.5 to Registrant’s Form 8-K filed September 28, 2020; File No. 001-32318).
31.1 | Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 | Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 | Certification of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 | Certification of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS | Inline XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH | Inline XBRL Taxonomy Extension Schema Document.
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

________________

* Indicates management contract or compensatory plan or arrangement.

49

Table of Contents

SIGNATURES

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.

|  |  |  | DEVON ENERGY CORPORATION
Date: October 30, 2020 |  |  |  | /s/ Jeremy D. Humphers
|  |  |  | Jeremy D. Humphers
|  |  |  | Senior Vice President and Chief Accounting Officer

50