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Leases | 12 Months Ended
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Dec. 31, 2024
Leases [Abstract] |
Leases | Leases 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 primarily relate to real estate. Certain of Devon’s lease agreements include variable payments based on usage or rental payments adjusted periodically for inflation. Devon’s financing lease arrangement contains various covenants, including covenants similar to the 2023 Senior Credit Facility. On February 14, 2025, Devon’s Board of Directors approved an early extinguishment of an approximately $300 million real estate finance lease included in the table below for a cash payment of approximately $275 million. This extinguishment and acquisition of the associated real estate is expected to occur in the first quarter of 2025. In conjunction with extinguishing the lease, Devon expects to sell the associated real estate and considers the related real estate assets held for sale as of February 14, 2025. In the first quarter of 2025, Devon expects to recognize a non-cash loss of approximately $160 million, consisting of an asset impairment of approximately $185 million partially offset by an approximately $25 million gain on early lease extinguishment. Upon lease extinguishment and sale of the associated real estate and related sales proceeds received, Devon's annual net financing costs and DD&A will be reduced by approximately $18 million and $11 million, respectively. The following table presents Devon’s right-of-use assets and lease liabilities.
|  | December 31, 2024 |  |  | December 31, 2023 |
|  | Finance |  |  | Operating |  |  | Total |  |  | Finance |  |  | Operating |  |  | Total |
Right-of-use assets |  | $ | 248 |  |  | $ | 55 |  |  | $ | 303 |  |  | $ | 246 |  |  | $ | 21 |  |  | $ | 267 |
Lease liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current lease liabilities (1) |  | $ | 25 |  |  | $ | 28 |  |  | $ | 53 |  |  | $ | 21 |  |  | $ | 12 |  |  | $ | 33 |
Long-term lease liabilities |  |  | 293 |  |  |  | 27 |  |  |  | 320 |  |  |  | 286 |  |  |  | 9 |  |  |  | 295 |
Total lease liabilities (2) |  | $ | 318 |  |  | $ | 55 |  |  | $ | 373 |  |  | $ | 307 |  |  | $ | 21 |  |  | $ | 328 |
(1) Current lease liabilities are included in other current liabilities on the consolidated balance sheets. (2) Devon has entered into certain leases of equipment related to the exploration, development and production of oil and gas that had terms not yet commenced as of December 31, 2024 and are therefore excluded from the amounts shown above. T he following table presents Devon’s total lease cost.
|  |  | Year Ended December 31, |
|  |  | 2024 |  |  | 2023 |  |  | 2022 |
Operating lease cost | Property and equipment; LOE; G&A |  | $ | 28 |  |  | $ | 13 |  |  | $ | 22 |
Short-term lease cost (1) | Property and equipment; LOE; G&A |  |  | 234 |  |  |  | 193 |  |  |  | 140 |
Financing lease cost: |  |  |  |  |  |  |  |  |  |
Amortization of right-of-use assets | DD&A |  |  | 11 |  |  |  | 9 |  |  |  | 8 |
Interest on lease liabilities | Net financing costs |  |  | 19 |  |  |  | 15 |  |  |  | 11 |
Variable lease cost | G&A |  |  | — |  |  |  | 5 |  |  |  | — |
Lease income | G&A |  |  | (10 | ) |  |  | (10 | ) |  |  | (8 | )
Net lease cost |  |  | $ | 282 |  |  | $ | 225 |  |  | $ | 173 |
(1) Short-term lease cost excludes leases with terms of one month or less. The following table presents Devon’s additional lease information.
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
|  | Finance |  |  | Operating |  |  | Finance |  |  | Operating |
Cash outflows for lease liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Operating cash flows |  | $ | 22 |  |  | $ | 27 |  |  | $ | 15 |  |  | $ | 13 |
Investing cash flows |  | $ | — |  |  | $ | 1 |  |  | $ | — |  |  | $ | 1 |
Right-of-use assets obtained in exchange for new lease liabilities |  | $ | 14 |  |  | $ | 59 |  |  | $ | — |  |  | $ | 13 |
Weighted average remaining lease term (years) |  |  | 8.2 |  |  |  | 2.1 |  |  |  | 9.4 |  |  |  | 2.2 |
Weighted average discount rate |  |  | 6.2 | % |  |  | 5.3 | % |  |  | 6.1 | % |  |  | 4.9 | %
The following table presents Devon’s maturity analysis as of December 31, 2024 for leases expiring in each of the next 5 years and thereafter.
|  | Finance |  |  | Operating |  |  | Total |
2025 |  | $ | 25 |  |  | $ | 30 |  |  | $ | 55 |
2026 |  |  | 25 |  |  |  | 24 |  |  |  | 49 |
2027 |  |  | 25 |  |  |  | 4 |  |  |  | 29 |
2028 |  |  | 24 |  |  |  | — |  |  |  | 24 |
2029 |  |  | 22 |  |  |  | — |  |  |  | 22 |
Thereafter(1) |  |  | 349 |  |  |  | — |  |  |  | 349 |
Total lease payments |  |  | 470 |  |  |  | 58 |  |  |  | 528 |
Less: interest |  |  | (152 | ) |  |  | (3 | ) |  |  | (155 | )
Present value of lease liabilities |  | $ | 318 |  |  | $ | 55 |  |  | $ | 373 |
(1) Devon has one real estate lease that contains a residual value guarantee. Under the lease terms, the residual value guarantee stipulates that if the lessor were to sell the leased property and receive sale proceeds less than 90% of the lease liability at the time of sale, Devon would be required to make a shortfall payment to the lessor for the difference. Devon rents or subleases certain real estate to third parties. The following table presents Devon’s expected lease income as of December 31, 2024 for each of the next 5 years and thereafter.
|  | Operating |
|  | Lease Income |
2025 |  | $ | 14 |
2026 |  |  | 15 |
2027 |  |  | 16 |
2028 |  |  | 16 |
2029 |  |  | 15 |
Thereafter |  |  | 67 |
Total |  | $ | 143 |

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