Derivative Financial Instruments

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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 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, 2023, Devon neither held cash collateral of its counterparties nor posted cash collateral to its counterparties. Given Devon's current credit ratings and the terms of the underlying contracts, Devon is not currently required to post collateral to its counterparties with respect to its open derivative positions, and we would not be required to post any such collateral as a result of any change to the amount of Devon's net liability for such positions.

Commodity Derivatives

As of September 30, 2023, 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 2023		23,000	$	73.38		81,000	$	69.63	$	94.29
Q1-Q4 2024		27,486	$	77.74		59,486	$	65.61	$	84.85


	Oil Basis Swaps
Period	Index	Volume (Bbls/d)		Weighted Average Differential to WTI ($/Bbl)
Q4 2023	Midland Sweet		66,500	$	1.11
Q1-Q4 2024	Midland Sweet		62,500	$	1.17
Q1-Q4 2024	NYMEX Roll		24,000	$	0.81
Q1-Q4 2025	Midland Sweet		53,000	$	0.97

As of September 30, 2023, 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 2023		161,000	$	3.36		147,000	$	3.67	$	7.62
Q1-Q4 2024		147,426	$	3.37		40,527	$	3.78	$	7.05
Q1-Q4 2025		13,068	$	3.49		—	$	—	$	—


	Natural Gas Basis Swaps
Period	Index	Volume (MMBtu/d)		Weighted Average Differential to Henry Hub ($/MMBtu)
Q4 2023	El Paso Natural Gas		145,000	$	(1.58	)
Q4 2023	Houston Ship Channel		140,000	$	(0.19	)
Q4 2023	WAHA		70,000	$	(0.51	)
Q1-Q4 2024	El Paso Natural Gas		34,863	$	(0.91	)
Q1-Q4 2024	Houston Ship Channel		110,000	$	(0.24	)
Q1-Q4 2024	WAHA		44,973	$	(0.58	)

As of September 30, 2023, 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)
Q1-Q4 2024	Natural Gasoline		3,000	$	69.11
Q1-Q4 2024	Normal Butane		3,350	$	37.58
Q1-Q4 2024	Propane		3,000	$	32.20

Financial Statement Presentation

All derivative financial instruments are recognized at their current fair value as either assets or liabilities in the consolidated balance sheets. Amounts related to contracts allowed to be netted upon payment subject to a master netting arrangement with the same counterparty are reported on a net basis in the consolidated balance sheets. The tables below present a summary of these positions as of September 30, 2023 and December 31, 2022.


	September 30, 2023									December 31, 2022
	Gross Fair Value			Amounts Netted			Net Fair Value			Gross Fair Value			Amounts Netted			Net Fair Value			Balance Sheet Classification
Commodity derivatives:
Short-term derivative asset	$	47		$	(13	)	$	34		$	138		$	(19	)	$	119		Other current assets
Long-term derivative asset		10			(6	)		4			12			—			12		Other long-term assets
Short-term derivative liability		(152	)		13			(139	)		(22	)		19			(3	)	Other current liabilities
Long-term derivative liability		(22	)		6			(16	)		—			—			—		Other long-term liabilities
Total derivative asset (liability)	$	(117	)	$	—		$	(117	)	$	128		$	—		$	128