In what could be the last quarterly financial report from Devon Energy as we know it, the Oklahoma City energy company that is about to move headquarters to Houston following a merger with Coterra Energy called its fourth quarter and 2025 results “outstanding.”
FINANCIAL RESULTS
Devon reported net earnings of $562 million, or $0.90 per diluted share, in the fourth quarter of 2025. Adjusting for items analysts
typically exclude from estimates, the company’s core earnings were $510 million, or $0.82 per diluted share.
Devon’s operating cash flow totaled $1.5 billion in the fourth quarter. The company funded its capital requirements and had $702 million of free cash flow for the quarter.
At the end of the fourth quarter, Devon had a cash balance of $1.4 billion and an undrawn credit facility of $3 billion. Outstanding
debt totaled $8.4 billion and the company’s net debt-to-EBITDAX ratio was 0.9 times.
“Devon’s disciplined execution and operational excellence defined 2025, culminating in outstanding results that exceeded fourth quarter expectations across all major value drivers,” said Clay Gaspar, president and CEO. “The success we achieved this year was underpinned by the momentum generated through our focused business optimization efforts, resulting in significant free cash flow and meaningful cash returns to shareholders.”
He called 2025 a “banner year” for Devon said described the merger with Coterra Energy as an effort to take “bold, strategic steps to significantly strengthen our portfolio.”
“This powerful combination brings together two industry-leading companies with complementary assets and proven track records of value creation, establishing a premier independent shale operator. This advantaged platform will deliver higher free cash flow and enhanced shareholder returns, well beyond what either company could achieve on its own.”
KEY FINANCIAL & OPERATIONAL HIGHLIGHTS
• Transformational Merger: Announced merger with Coterra Energy, creating a premier, large-cap shale operator
• Production Outperformance: Averaged 390,000 barrels of oil production per day in the fourth quarter, exceeding the
top-end of guidance
• Disciplined Cost Management: Invested $883 million of capital in the fourth quarter, 4 percent below midpoint
guidance, and reduced operating costs 8 percent compared to the first quarter of 2025
• Business Optimization Success: Achieved 85 percent of the $1 billion business optimization target in 2025 and on track
to fully achieve goal by year-end 2026
• Robust Cash Generation: Operations generated $1.5 billion of operating cash flow and $702 million of free cash flow
during fourth quarter
• Accelerated Shareholder Returns: Expect to increase quarterly dividend rate to $0.315 per share and a new $5 billionplus share repurchase program following merger close, subject to board approval
STRATEGIC MERGER WITH COTERRA ENERGY
On Feb. 2, 2026, Devon announced that it had entered into an agreement to combine in an all-stock merger with Coterra Energy.
The combination will create one of the largest shale operators in the world with an asset base anchored by a premier position in the economic core of the Delaware Basin. The go-forward company, to be named Devon Energy, is expected to unlock substantial value for shareholders by leveraging enhanced scale to improve margins, increase free cash flow, and accelerate cash returns through the capture of $1.0 billion in sustainable annual pre-tax synergies.
The transaction is expected to close in the second quarter of 2026. Upon completion of the transaction, Devon shareholders
will own approximately 54 percent of the combined company and Coterra shareholders will own approximately 46 percent of
the combined company on a fully diluted basis.
RETURN OF CAPITAL
Consistent with Devon’s strategic priority of delivering value to shareholders through a sustainable, annually growing fixed dividend, Devon plans to increase the quarterly dividend rate by 31 percent to $0.315 per share following merger close, subject to board approval. For the first quarter of 2026, a dividend of $0.24 per share is payable on Mar. 31, 2026, to shareholders of record at the close of business on Mar. 13, 2026.
The company also returned capital to shareholders through the ongoing execution of its $5.0 billion share repurchase program.
During the fourth quarter, Devon repurchased 7.1 million of its shares for $250 million. Since inception of the program, the company has returned $4.4 billion to shareholders by retiring approximately 14 percent of its outstanding shares. In connection with the announcement of the merger with Coterra, the company suspended share repurchasing activity, which Devon expects to extend through closing.
Following the close of the merger with Coterra Energy and the associated free cash flow benefits in the upcoming years, the company expects to establish a new share repurchase authorization in excess of $5 billion, subject to Board approval.
OPERATING RESULTS
Devon’s capital activity in the fourth quarter averaged 19 operated drilling rigs and 4 completion crews across its asset portfolio. This level of activity resulted in 95 gross operated wells being placed online, with an average lateral length of 10,200 feet.
Capital investment, excluding acquisition capital, was $883 million, or 4 percent below guidance. This positive variance was primarily attributable to effective cost management and timing of facility spend. The company also completed $141 million in leasehold acquisitions across multiple assets in its portfolio, primarily in the Delaware Basin.
Production averaged 851,000 Boe per day in the fourth quarter, exceeding the top-end of guidance. This positive result was driven by better-than-expected well performance, primarily in the Delaware Basin. Oil totaled 390,000 barrels per day in the quarter, which was 46 percent of total volume and above the top-end of the company’s guidance.
Production costs, including taxes, averaged $10.99 per Boe in the fourth quarter, a 4 percent reduction from the third quarter. The
largest component of production costs is lease operating expense and gathering, processing and transportation costs, which totaled
$8.60 per Boe in the quarter. Effective cost management efforts and less well workovers drove per-unit rates 3 percent below
guidance expectations for the quarter.
Underpinning these results is the continued strong progress in advancing the company’s business optimization plan. To date,
Devon has already achieved 85 percent of its $1 billion target, demonstrating the effectiveness and urgency of these initiatives.
With strong momentum established, the company is on track to fully achieve its $1 billion target by year-end 2026. These
actions are strengthening margins and maximizing capital efficiency across Devon’s assets.
Devon exited the year with estimated proved reserves of 2.4 billion Boe. Proved undeveloped reserves accounted for 24 percent of the total. Extensions and discoveries and positive performance revisions from the company’s drilling program added 593 million Boe of reserves in 2025, equating to a replacement rate of 193 percent of production. Capital costs incurred (excluding property acquisition costs) to deliver these additions totaled $3.6 billion, resulting in a finding and development cost of $6.14 per Boe.
Q1 2026 OUTLOOK
Production in the first quarter of 2026 is estimated to be reduced by 1 percent or 10,000 Boe per day (50 percent oil) due to
the impact of severe winter weather. Adjusting for this downtime, the company expects production to average 823,000 to
843,000 Boe per day. Capital spending in the first quarter is expected to be approximately $900 million.
Looking beyond the first quarter, the company’s full-year 2026 guidance issued today reflects standalone Devon operations.
Upon the expected closure of the Devon and Coterra merger in the second quarter of 2026, the company will provide updated
full-year guidance for the combined entity.